Evidencing European regional convergence clubs with optimal grouping criteria

Abstract

Growth literature has considered the existence of groups of economies that have been termed convergence clubs. This paper groups European regions in order to detect whether the existence of convergence clubs can be defended in this context. To this end, we define optimum criteria using an inequality measure. Our classification shows stability for extreme groups based on a stratification index. Results show evidence in favour of the presence of convergence clubs for the backward European regions.

Notes

¹ Stratification indexes present following characteristics: values always belonging to [−1, 1]; if Q _i  = 1 group should be considered as a perfect stratum; Q _i decreases when mobility is observed between groups; if Q _i  = 0 group is not considered as a stratum; if Q _i  < 0 implies non-homogeneity (if the group is composed of subgroups); and finally, if Q _i  = − 1 group is composed of two perfect strata.

² If distributional characteristics are captured by an inequality measure strictly Schur-convex I(·) (which satisfies Pigou-Dalton transfer conditions) the grouping procedure will reduce the losses of distribution data, because it maximizes I(·). The method also ensures that those individuals are not superimposed.