Abstract
Abstract This paper applies the statistical concepts of σ-convergence and unconditional β-convergence to institutional development within several country groups hierarchized to the degree of European integration (e.g., euro area). Two sets of indicators are employed to measure institutional development: first, the Worldwide Governance Indicators, and second, the product market regulation indicator of the OECD and the Doing Business distance to frontier indicator of the World Bank. The authors can clearly confirm institutional β-convergence within the EU and its aspirants, which is mainly driven by the new Member States and acceding, candidate, and potential candidate countries. However, euro-area countries converge only in the area of product market and business regulation— not in the area of governance. In fact, the authors show evidence for β-divergence in rule of law within the first twelve euro-area members. Concerning σ-convergence, the results are less clear. Only the EU including the EU-aspirants reduced the cross-country variance in all aspects of institutional development.
Highlights
The enlargement of the European Union (EU) and its deepening in specific areas, for example, monetary policy is expected to promote convergence in economic rules, regulation, and policies especially through the acquis communautaire
Thereafter, we analyze by the means of descriptive statistical analysis whether institutional convergence has occurred in several country groups hierarchized to the degree of European integration, for example, within the EU Member States or the euro area
The primary interest is on institutional convergence as catching-up in institutional development
Summary
The enlargement of the European Union (EU) and its deepening in specific areas, for example, monetary policy is expected to promote convergence in economic rules, regulation, and policies especially through the acquis communautaire. Alesina et al (2017) do some exercise on σ-convergence in institutional development in the EU and Heckelman (2015) at the global level Our paper brings both statistical concepts of institutional convergence together and relates them to the European integration process. Thereafter, we analyze by the means of descriptive statistical analysis whether institutional convergence has occurred in several country groups hierarchized to the degree of European integration, for example, within the EU Member States or the euro area. We assess whether countries involved on the European integration process, for example the euro-area members, institutionally converge. This is a starting point for future research to look at political and economic consequences.
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