Is an Economic Integration a Stimulus for Convergence? Analysis of European Union’s Last Enlargement

Abstract

This study investigates the issue of the economic integration model's stimulus for convergence between the countries. As an example, the European Union, which is a successful model of economic integration, is taken. With the last enlargement wave of the European Union, the convergence of new members that joined the Union after 2000 was analyzed. Real convergence is estimated by using log regression model and nominal convergence is analyzed with the help of Convergence Reports. The results show that participation in an economic integration and also trade openness contribute to convergence in terms of Gross Domestic Product (GDP) growth among members. Trade openness is a stimulus for convergence in GDP growth in former members and new members, apart from the crisis and recovery years (2008-2013). It can be said that being included in an economic integration has a positive effect on trade openness, GDP growth and GDP per capita. Convergence was seen in 2000-2007 and 2014-2020 periods. In the 2008-2013 period, divergence was observed. The divergence experienced during the crisis years showed that nominal convergence was not sufficient to achieve harmonized growth and to overcome the crisis. In the European Union, a more harmonized growth can be achieved if real convergence is also taken into account.