Regional convergence in the enlarged European Union

Abstract

There are only a few studies which examine regional convergence in the enlarged European Union. None of these approaches uses a conditional convergence model, which considers different initial conditions of regions. We refer to the Mankiw et al. (1992) model to examine convergence including the New Member States. Note that most researchers use equal values of depreciation rate and rate of technological progress for all regions. Our analysis is based on country specific values of both variables, which vary markedly. We give empirical evidence for a convergence process which exceeds the often measured value of 2%.

Notes

¹ The standardization of the binary contiguity matrix is not possible, if one region has no border with another region. Therefore, the EU Member States Cyprus and Malta are excluded. Islands are dropped from the analyses for the same reason.

² The spatial tests and the spatial error model are based on a binary contiguity matrix.

Table 2. ML estimation of the spatial error model