Convergence in GDP per Capita across the EU Regions - Spatial Effects

Abstract

The aim of this paper is to offer an empirical insight into the spatial effects of growth of regional income and disparities across EU regions (NUTS 2). Since regions are spatial units and there are interrelated standard linear regression is not sufficient to evidence the convergence process. Two models (Spatial Lag Model – SLM and Spatial Error model – SEM), derived from spatial econometrics, have been used to identify and explain spatial effects in convergence clubs—all EU countries (EU-28), countries that entered the EU in 2004 (EU-13) and countries that were in EU prior to 2004 (EU-15). Unconditional and conditional β-convergence has been examined in the period 2000-2015 thus covering two financial perspectives (including n + 2 rule3). Dummy variables have been also applied to catch the country-specific effects, such as national policies, legislation, technology progress, etc.