Transnational Income Convergence and National Income Disparity : Europe, 1960~2012

Abstract

This study identifies income convergence in Europe over 1960 to 2012. The Great Recession since 2008 reversed the GDP per capita convergence in the EU-15, but the extransition countries have mostly continued to catch up. We found this by analysing the Sigma convergence of GDP per capita in the European Union. With a few pauses, there has been convergence in the European Union since 1960. Historically, convergence has been faster when aggregate GDP growth has been faster. On top of that, we link evolvement in national income distributions with Europe-wide convergence. It is meaningful because if many people are left outside of income increases, then the general development is not in line with the spirit of the EU convergence. Generally, wealthier countries are found to have lower income disparities as measured by Gini coefficients than poorer countries. The GDP per capita convergence was not correlated with changes in income distribution over the period of 2000~2011 except for a group of six catching-up countries, namely Cyprus, the Czech Republic, Hungary, Latvia, Lithuania, and Poland.