What Is the Evolution of Convergence in the EU? Decomposing EU Disparities up to NUTS 3 Level

Abstract

Research on convergence deals with the question of whether regional disparities are decreasing over time. Aiming to decompose EU disparities covering regions of all levels, this paper fills the gap of the empirical research on convergence in the EU in the following ways: (i) the research updates the assessment of regional disparities in the EU emphasizing, but not limited to, the analysis at the NUTS 3 level; (ii) based on a constructed three-level Theil index, the research decomposes EU disparities into between-country, within-country at the NUTS 2 level, and within the NUTS 2 region at the NUTS 3 level components, covering the period of 1995-2014 and all EU regions, (iii) it examines the linkages between the development of innovation and technology, sustainability, and evolution of disparities. Our main findings suggest that convergence in the EU is still present at different regional levels, but its speed is slowing down. Total EU disparities were decreasing mainly because of reducing disparities between member states. At the same time, in the majority of EU member states, old and new, within-country disparities were growing at all regional levels, and now within-country disparities account for almost two-fifths of total EU disparities.

Mediating Effects of Cohesion Policy and Institutional Quality on Convergence between EU Regions: An Examination Based on a Conditional Beta-Convergence Model with a 3-Way Multiplicative Term

“…As the dependent variable, we used annual growth of per capita GDP and GVA per person employed at the NUTS 2 and 3 disaggregation level as a proxies for economic growth and productivity growth at the regional level, ascertaining all shortcomings of this approach discussed in Butkus et al [63], among many others. For the detailed explanation of the dependent variable and data source for Y i,t , see Appendix C.1.…”

Comparative Analysis of Growth Convergence in Selected West African Countries

“…In their paper, they used the empirical shrinkage Bayesian estimator. But to attempt our main goal which is to compare the convergence path, we decide to use the simple and traditional approach of ordinary least square (OLS) estimator (see Maddala and Wu, 2000, p.638;Butkus et al, 2018). Despite some bias which can be associated with this method, we believe that it is not a great concern which can affect the order of estimates since values of estimates from Bayesian approach for this study seem to be similar to those of the OLS.…”

“…They proposed a detection of convergence clubs based on spatial analysis where each club has its own steady state based on regional factors. Butkus et al (2018) have shown the paradox of convergence in European regions. They find absolute convergence occurring in European countries.…”

“…These convergence rates are low and even lower than the 2% rate obtained by Barro et al (1991) for the US and European countries. These findings can be explained by the high heterogeneity of the countries in terms of their initial income (Butkus et al, 2018). Countries in the first group grow slower than countries in the second group and this will be true even after reaching their study state (steady state < 0).…”

Perspectives on the future of the EU Cohesion Policy

“…Moreover, if the scope is changed, the convergence observed between EU Member States sometimes actually masks an increase in regional intra-state inequalities. Convergence phenomena observed at NUTS 3 level produce either convergence or divergence locally (Bourdin, 2015;Butkus et al, 2018). Some studies have particularly highlighted a quick growth recorded in metropolitan regions due to a concentration of service activities, direct foreign investment, and a significant number of start-up launches.…”