Club convergence in European regions

Abstract

This study investigates the ‘club convergence’ hypothesis applying the stochastic notion of convergence to groups of European regions. In order to avoid the group selection bias problem, the innovative regression tree technique was applied to select endogenously the most important variables in achieving the best identification of groups on the base of per capita income and productive specialization. Tests on stochastic convergence in each group evidences a strong convergence among the wealthiest regions of the European Union and a trend of weak convergence among the remaining groups, confirming Baumol's hypothesis of convergence.

Notes

¹ According to EC Regulation No.1059/2003.

² The analysis starts from 1984 due to the lack of data in the respective regional labour statistics.

³ During the period 1983–1987 there has been a different aggregation of Greek regions at NUTS2 level. Kriti and Thessalia are the only regions which presents data for the period 1984–2000.

⁴ The geographic units for UK are at NUTS1 level of Eurostat classification because of the lack of data for NUTS2 units.

⁵ Agricultural-forestry and fishery, manufacturing, fuel and power products, non-metallic minerals and minerals, food-beverages-tobacco, textiles-clothing-leather and footwear, chemical products, metal products, machinery-equipment and electrical goods, various industries, building and construction, transport and communication, credit and insurance services.