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An Empirical Analysis of Income Convergence in the European Union

Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège, CREPP Working Papers 01/2010;
Source: RePEc

ABSTRACT In this paper, we investigate the convergence process within the European Union (27 countries). More particularly, we study the convergence process of the new entrants from Central and Eastern Europe and of the 15 Western countries between 1990 and 2007. Applying a panel approach to the convergence equation derived by Mankiw et al. (1992) from the Solow model, we highlight the existence of heterogeneity in the European Union and show that new entrants and former members of the European Union can be seen as belonging to significantly differ ent groups of convergence. The existence of heterogeneity in the European Union or the Eurozone might affect their stability as the recent Greece’s sovereign debt crisis illustrates it.

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