Economic Convergence in the European Union

Abstract

Starting with the Treaty of Rome (1957), the European Union adopted common policies to promote “harmonious economic development and balanced expansion.” The paper investigates how successful such policies were, by examining whether there was economic convergence of the real per capita GDP in the EU. Two measures of convergence are employed. The first is σ, which is based on the cross standard deviation of the real per capita GDPs of the EU countries; the second is β convergence based on the neoclassical growth model. Both σ and β were estimated using EU data for the period 1960-1995. The empirical findings support the hypothesis of economic convergence within the EU except for the 1980-85 sub-period where weak divergence was indicated.