Convergence and efficiency: evidence from the EU-15

Abstract

This paper considers per capita income and productive efficiency beta-convergence for 15 EU countries (EU-15) during the European Economic and Monetary Union and the period preceding it. A production frontier approach is used to obtain efficiency measures. Even though we uncover evidence of convergence in both per capita income and efficiency, the results differ across various subperiods. Convergence per capita income occurs during 1986-90 and 1991-95. Productive efficiency convergence occurs during 1986-90, 1996-2000, and 2000-4. When we control for different efficiency levels, it emerges that less efficient countries display per capita income convergence more often. We also consider the implications of income inequality on per capita income growth and productive efficiency change and find that it mainly affects the latter.

Keywords:

• beta-convergence
• data envelopment analysis
• efficiency