Process Of Economic Convergence Research Articles

Testing the validity of Wagner's law in four income groups: A dynamic panel data analysis

This study endeavors to examine the validity of Wagner's Law, which has received considerable attention in recent years. We develop a panel dataset of 20 countries, taking five countries from each income group defined by the World Bank, for the 1991–2018 periods. Five different versions of the law are tested using this dataset. We add further depth to the model by involve the government's revenue and the volume of trade as independent variables. We inquire into the subsistence of cross-sectional dependence. To determine the order of integration, we conduct LLC, IPS, and CADF tests. The results show that the dataset has I (0) and I (1) series, and no series is found to be of I (2). Then we perform the panel ARDL test, and calculate PMG and DFE estimates. We use the Hausman test to choose among the estimates. In each version of the law, the error correction term indicates the presence of both long-term associations within the variables and an economic convergence process. However, we find no evidence to support the law for any version. Additionally, we conduct the panel cointegration tests, such as Westerlund, Pedroni and Kao. These cointegration tests generate results accordant with the ARDL findings.

Economic Convergence Among Asia-Pacific Economic Cooperation Members. A Comparative Analysis, 1960–2020

The process of global economic integration is justified by the primary goal of inclusive and balanced growth for all economies, so it is relevant to identify the extent to which this goal has been achieved. This research evaluates whether the member economies of the Asia-Pacific Economic Cooperation (APEC) have experienced economic convergence during the 1960–1990 (pre-APEC) and 1990–2020 (post-APEC) periods. For this purpose, beta, sigma and gamma convergence are estimated, which are methodological approaches proposed by Barro and Sala-i-Martin (1991, Brookings Papers on Economic Activity, 1991(1), 170–182) and Marchante et al. (2006, Fundación de Estudios de Economía Aplicada Working Papers No. 2006-05), for APEC as a region and for the high- and middle-income economies that conform it. The results show that the process of economic convergence among APEC members intensified after its formation in 1989 and that the region can be categorized as an ‘economic convergence club’. As well as that, the high- and middle-income groups are converging towards their respective stationary state.

The Economic Performance of Reunited Families in Switzerland, 2013–2018

Family migration has gained prominence as one of the main reasons for international mobility in both Switzerland and the rest of western European countries. However, research aimed at evaluating the economic performance of reunited families has been constrained by the unavailability of individual income and/or household composition data. The joint use of population registers and information about individuals’ social security contributions has allowed us to overcome this limitation. Using transition matrices and logistic models, we assess the economic performance of reunited families at the household level and evaluate differences based on the region of birth of the person initiating the process, as well as the financial situation of these families 5 years after the reunion. The results show a process of economic convergence between the three groups under analysis despite the initial differences in the income level of families, and that most reunited families achieve satisfactory living conditions. They also highlight the hybrid nature of Swiss-headed reunited families, which initially resemble those headed by a non-EU/EFTA person, in terms of the contributions their members make to the household income, but after 5 years they contribute similarly to EU/EFTA headed reunited families.

Theoretical and methodological approaches to the study of the processes of economic convergence and divergence of regional integration associations

The article presents the results of the study of theoretical and methodological provisions and classification attributes (principles, types, approaches, specificity) of the conceptual framework of «convergence/divergence» conceptual systems as applied to regional integration associations in an uncertain geo-economic environment. The authors conducted an extensive review of scientific literature and cross-research materials which helped to identify forms of interaction between integration associations under the conditions of increasing globalization through deepening of integration processes, which made it possible to formulate a new economic effect of regionalization «aggregation». The study, as a whole, deepens the systematic mapping of the development of the main stages in the evolution of economic models based on the theory of convergence and divergence in the system of economic knowledge, which will serve as a basis for retesting old and initiating new empirical tests for econometric modelling of the impact of endogenous and exogenous variables on the activities of integration associations.

Using the aggregate production function to determine the sources of economic convergence of voivodships in Poland

The article deals with economic convergence, which has long been one of the most important issues in the field of economics. The aim of the study is to identify the factors which determine the economic convergence of voivodships, i.e. provinces (and more specifically, factors responsible for the regional differentiation of GDP per working person) and to assess the strength of their impact. The study was conducted for the years 2014–2019 on the basis of data provided by the Local Data Bank of Statistics Poland. The aggregate production function of the Cobb-Douglas type was used. It allows the influence of the accumulation of production factors to be separated from the influence of the changes occurring in the applied technology on economic growth in voivodships and, consequently, on the process of economic convergence. The achievement of the aim of the research necessitated the decomposition of the aggregated production function. The results of the study did not confirm the occurrence of economic convergence in voivodships. A tendency was observed for the regional differentiation of the GDP per working person to deepen during the examined period, which resulted from the differences in the spatial accumulation of physical capital and technological progress.

EVOLUTION OF CONVERGENCE THEORY IN THE CONTEXT OF INTEGRATION OF THE SOCIO-ECONOMIC SYSTEM OF REGIONS

The article considers the processes of convergence and divergence in the regional space and identifies the main differences. It is established that the representatives of the first theory insist on the need to unite and converge economies, while divergent see the effective economic development of regions by concentrating all resources in potentially developed areas. Theoretical phenomena about the nature, forms and nature of regional development are constantly expanding and improving. The generally accepted basis of regional economy is the concept of regional development, which is divided into two opposing theories: the first theory - advocate the possibility of convergent regional development, the second theory - insists on the divergence of levels of regional development. If the first theory insists on the need to unite and bring economies together, divergent see the effective economic development of regions by concentrating all resources in potentially developed areas. The vast majority of researchers use convergence in terms of global scale and global space, but according to the author, it is regional economic convergence that has a good chance of realization and growth rate more successful than the process of convergence of economies. It is worth noting that the regions of one country have similar territorial, economic, political and social characteristics, which allows us to consider the process of their convergence on different grounds. If we talk about countries and their rapprochement, then, firstly, this process is long-term and risks not "catching up" with constant technological and global changes, as each country is in its own technological structure, and secondly, there are a number signs that the convergence of the economies of certain countries is unlikely or partial, and as a result, the expected equalization of the level of development of economic economies will be difficult to achieve. Therefore, taking into account the positions of the considered researchers, we consider it expedient and effective to study the processes of economic convergence in terms of convergence of levels of regional development.

Analysis of the Economic Convergence Process in the Benelux Countries at the Turn of the Millennium

Belgium, Netherlands and Luxembourg have been forming a regional grouping known as the Benelux for over seventy years. The analyzed countries were a model of the regional cooperation model for many European associations and communities. The aim of the research was to answer whether there was a process of economic convergence between the Benelux countries.

Wage convergence after euro adoption - the case of Slovakia

According to the theory of integration, welfare increase is the long-term indirect effect of joining the euro area. Monetary integration accelerates the processes of economic convergence, including income convergence, which is particularly desired by the societies of catching-up economies. This process is crucial for increasing the long term potential for macroeconomic sustainable growth of the economy. The countries of the Visegrad Group are institutionally and structurally similar. But only Slovak Republik adopted euro in 2009, another Visegrad countries stay by their own currencies. So it is a good opportunity to assess the effects of joining the euro zone on wage growth in the medium term through a comparative analysis. The aim of the research is to assess the impact of joining the euro area on the wage growth rate in Slovakia. The research was carried out using the comparative method. Three types of convergence are taken into account: beta, sigma and gamma. An extension of the implementation of the concept of beta, sigma and gamma convergence is the estimation for variables other than GDP, i.e. for the wage growth rate. The analysis covers the 2009-2019 period. The study confirms the existence of beta and sigma convergence. The convergence of earnings between EU countries occurs, wages in less developed CEE countries, tend to grow faster than do in wealthier ones. On the other hand, no gamma convergence was found. The higher rate of wage growth in Slovakia as compared to other countries of the Visegrad group was also not confirmed.

A comparison between VAR processes jointly modeling GDP and Unemployment rate in France and Germany

Investigating the relationship between Gross Domestic Product and unemployment is one of the most important challenges in macroeconomics. In this paper, we compare French and German economies in terms of the dynamic linkage between these variables. In particular, we use an empirical methodology to investigate how much the relationship between Gross Domestic Product and unemployment growth rates are dynamically different in the two major European economies over the period 2003–2019. To this aim, a Vector Autoregressive model is specified for each country to jointly model the growth rate of the two variables. Then a new statistical test is proposed to assess the distance between the two estimated models. Results indicate that the dynamic linkage between Gross Domestic Product and unemployment is very similar in the two countries. This empirical evidence does not imply identical product and labor markets in France and Germany, but it ensures that in these markets there are common dynamics. This could favor the process of economic convergence between the two countries.

Modeling of Economic Convergence Processes in Eastern Europe Countries

The article describes the features of the processes of economic convergence in the countries of Eastern Europe for the last 10 years. The analysis of β- and σ-convergence was carried out based on a system of macroeconomic indicators with 10 key parameters. The calculation of the direction and speed of convergence was performed using the econometric instruments in the region as a whole and pairwise analysis of the β-convergence index for all analyzed countries. The obtained results allowed to conclude the inequity development of Eastern European countries and the lack of a stable trend towards convergence of macroeconomic indicators. The resulting model is universal and can be applied to other world regions or to determine the processes of convergence of another system of macroeconomic indicators and choose main directions of reforming to bring national economies closer and achieve stronger external relations.

Regional income convergence in an emerging Asian economy: empirical evidence from Vietnam

ABSTRACT Vietnam as an emerging economy has experienced strong economic growth since 1990 with an average annual income per capita growth of 8.8 per cent for 1990–2018. The country has around sixty provinces, and applying cross-section and time-series tests of convergence the analysis shows that approximately half of these have experienced a process of convergence towards the income level of Ho Chi Minh City (HCMC). Still, cities like HCMC and Ha Noi have a per capita income level several times higher than the lowest income provinces. The analysis also finds that provinces being a neighbour to the major city areas – and having more manufacturing and service industry activities than agriculture – are more likely to experience a process of economic convergence towards HCMC. This is also revealing that provinces having an infrastructure that can attract and adopt investments – being foreign investments or government funded activities – appear more likely to catch up with the high-income areas.

Location matters: A spatial econometric analysis of regional resilience in the European Union

AbstractThe aim of this study is to empirically examine regional resilience by assessing economic growth patterns in two distinct groups of regions across the European Union in the aftermath of the 2008 economic and financial crisis. In an effort to consider the regions as interconnected economic areas and account for spillover effects, the model incorporates complex spatial effects that consider both spatial heterogeneity and spatial dependence. The analysis follows a step‐wise approach. First, spatial heterogeneity is assessed by employing Exploratory Spatial Data Analysis, which identifies two distinct spatial regimes, a core and a periphery, based on their initial level of economic development. A Spatial Durbin Model is then employed to estimate the determinants of regional resilience and growth in both regimes, including potential spillover effects. Results indicate that while both spatial regimes experience processes of economic convergence, recent determinants of growth, as well as spillover dynamics, differ across the two. In the core regime, better institutions, higher shares of investment, and an economy specialized in higher value‐added sectors significantly spur domestic growth, with investment also inducing positive spillover effects to neighbouring regions. In the peripheral regime, low shares of lower‐secondary educational attainment and high shares of tertiary educational attainment have a significant positive effect on domestic growth, with higher shares of tertiary educational attainment also inducing positive spillover effects. Moreover, technological readiness is also identified as an important factor in the peripheral regime with positive spillover effects. Upon the bedrock of these findings, initial policy proposals are offered.

Between Competitiveness and Sustainability? Achievements and Dilemmas of Regional Policy in the Context of Economic Development of Rural Regions: the Case of Poland

A clear long-term economic trend is the concentration of capital and settlement. These processes increasingly include development centres located in cities and their functional areas. In turn, many peripheral areas, including rural areas, are subject to socio-economic marginalization. As a result, the inter-regional and intra-regional disparities in wealth and quality of life become more visible and deepen. Increasing spatial differences are confront with numerous scientific explanations and remedies, which usually are translated into different strategies and practices of regional policy. Regional policy actions assume a different scope, objectives, instruments of intervention and could be categorized as a policy based on the paradigm of competitiveness (polarisation) or sustainability. The aim of the paper was to determine the level of economic disparities between urban and rural regions in Poland in the context of assessment of implemented regional policy. In the paper selected approaches to supporting rural development in regional policy, namely the perspectives based on the paradigm of competitiveness and sustainability were characterised. The analyses carried out documented the differences in the intensity of support of EU Cohesion Policy tools per capita in favour of urban regions. Even though the value of financial support from EU funds was positively correlated with the level of regional development, there was no statistically significant impact of this intervention on the processes of economic convergence and divergence. The conclusions presented in the study were based on the analysis of the Eurostat data gathered for 72 Polish sub-regions in 2007-2015. For the purpose of the study the statistical methods (i.e. descriptive statistics, measures of economic convergence), as well as the content analysis of strategic documents were used. Key words: rural regions, competitiveness, sustainability, economic development, regional policy

Review on “Dezvoltarea regională. De la teorie la practică” authored by Daniela ANTONESCU, LUMEN Publishing House

The volume Dezvoltarea regionala. De la teorie la practica (Regional Development. From Theory to Practice) authored by Daniela Antonescu, published by LUMEN Publishing House, aims to create an image on the process of regional development in Romania starting from the analysis of the evolution of territorial inequalities as well as of the economic convergence process that takes place under the impact of the cohesion policy of Europe 2020 strategy. The specific approaches to this volume are of a theoretical-methodological nature, with the aim of reviewing the entire range of recent theories in the field of regional sciences as well as the model of analysis of public policies, as well as a second direction aimed at the analysis of territorial cohesion as well as the economic and social inequalities that have emerged at regional level, both in Romania and at European Union level. (Antonescu, 2019, p. 14).

Economic growth and disparities: an empirical analysis for the Central and Eastern European countries

Research background: The processes of economic convergence observed in many devel-oping countries are characterized by reduction of economic differences on the cross-country level, which are accompanied by growing internal economic inequalities. This may stem from the fact that in the catching-up countries a more dynamic growth pattern is observed in the economically strongest regions, which is initially reflected in spatial polarization and increasing regional inequalities. However, just as the countries reach higher levels of devel-opment, the diffusion of growth-inducing impulses to less-developed areas should lead to the spatial equalizing of the development levels and reducing regional inequalities.
 Purpose of the article: The aim of the paper is to determine the relationship be-tween the level of economic growth and observed economic inequalities in Central and Eastern European (CEE) countries. The theoretical framework adopted to describe and explain those relations is the so-called Williamson?s hypothesis in which the relationship between the scale of regional inequalities and economic growth is illustrated by a curve shaped like an inverted U.
 Methods: The research procedure was intended to verify William-son?s hypothesis by estimating parabolic econometric models. Indicators of economic growth along with measure of regional inequalities (Williamson?s coefficient of variation) were used in the regression modeling. The research period spanned the years 1995-2014.
 Findings & Value added: In the light of the study of CEE countries, it was possible to observe both convergence symptoms as well as divergence tendencies. It can be thus stated that the analyzed CEE countries followed a similar path to the one observed earlier by Wil-liamson in other developing countries. However, the analyses conducted by the authors at the national and regional levels of CEE countries were equivocal and did not fully support the theoretical assumptions of Williamson?s hypothesis.

The happiness gap between transition and non-transition countries

Since 1989, post-communist countries have undergone profound changes in their political, economic, and social structures and institutions. Across a range of development outcomes—in terms of the speed and success of reforms—transition is an “unhappy process.” The “happiness gap,” i.e. the difference in average happiness levels between the populations of transition and non-transition economies, is closing, but at a slower pace than the process of economic convergence. Economic growth, as the determinant of a country’s collective well-being, has been superseded by measurements of institutional quality and social development.

Global inequality: a new approach for the age of globalization. By Branko Milanovic

Inequality represents one of the greatest policy challenges of our time—something that could permanently undermine the viability of the current socio-economic model. Global inequality by Branko Milanovic, a senior scholar at the Luxembourg Income Study Center in New York, is essential reading for those wishing to gain an understanding of the deepest roots of the unequal wealth and income distribution in a historical and global context. The book begins with a simple, if stark, observation. Income inequality is rising within nations but it is declining globally. In the emerging world, the rapid process of economic convergence with the West has produced a burgeoning middle class, contributing to partly close the gap with the advanced world. At the same time, globalization and skill-biased technological change have benefited a small elite of highly qualified professionals in Europe and North America, whose remuneration has increased exponentially over the last few decades. This is the top 1 per cent that controls almost 50 per cent of global wealth.

Gospodarka państw Europy Środkowo-Wschodniej w okresie kryzysowych turbulencji

The article discusses the course and results of the process of economic development of Central and Eastern Europe (CEE) in the context of integration with the European Union, with a particular emphasis on conditions connected with the global financial crisis. In the study the CEE economy was characterised against the background of the world and Europe, followed by a presentation and interpretation of the changes in dynamics of economic growth. It was found that these changes were strongly correlated. The text also presents the evolution of the situation on the labour market during the crisis. The article ends with synthetic conclusions from the analyses. The research proves that the process of economic convergence occurred in all CEE countries, which was a positive effect of EU cohesion policy. This process was, however, very diverse, and the global crisis brought about far-reaching, uneven changes, including even a few cases of divergence.

Wpływ globalnego kryzysu finansowego na spójność gospodarczą państw Europy Środkowo-Wschodniej

The aim of this study is the identification and interpretation of the different effects of the global financial crisis on the process of building economic cohesion in Central-Eastern Europe (CEE). Therefore, the text presents the results of a preliminary analysis of the process of economic development of 11 CEE countries in 2008–2014, and so during the global financial crisis and following recession and macroeconomic instability, especially in the sector of public finances. This process is presented in the context of European Union cohesion policy. Particular attention was paid to the impact of the crisis on economic growth of individual CEE countries. Paper consists of an introduction, two parts and synthetic conclusions. In the first part, the territorial, demographic and economic potential of Central – Eastern Europe was presented against the European Union. It was found that its size is not impressive, but still important on a continental scale. The negative role of observed in CEE since the mid-1990s trend of depopulation was out-lined, which during the crisis has deepened. In the second part there were discussed and interpreted the consequences of the global crisis on economic cohesion of CEE. This was done on the basis of a comparative analysis of the level and pace of GDP growth in the CEE countries, allowing to determine the results of the process of economic convergence taking place in these countries. Research results presented in the article prove that in the discussed period economic conver-gence of CEE countries clearly dominated the divergence, which undoubtedly is due Community cohesion policy. The process of development was, however, very diverse, and the crisis has had negative impact on it, but in the field of convergence it was ambiguous. In some countries, accel-eration of convergence took place in this particular period (the largest in Poland), while the other divergence occurred (Croatia, Slovenia) or position in relation to the EU average has not changed compared to precrisis level (Estonia, Czech Republic).

Is the European integration speeding up the economic convergence process of the Central and South-Eastern European countries? A shock perspective

In the current context of continuous reassessment of the sustainability of the single currency and gradual enlargement of the euro area during the last decade, the objective of this research is to obtain new insights into the factors that determine the synchronisation of shocks in the Central and South-Eastern European countries vis-a-vis the euro area. The research contributes to the previous work by making a novel use of error correction model in a dynamic panel context which is extended by adding several important omitted variables related to the trade structure and policy coordination. We find that an increase in trade intensity, intra-industry trade and financial integration leads to less frequent asymmetric shocks. On the other hand, divergent fiscal policies are estimated in some model specifications to increase the shock divergence process, although the estimated impact is rather small to counteract the positive effects associated with trade and financial integration. The identified relationships in this research are affected by the significant trade and growth slowdown in the crisis period; while the global economic turmoil has boosted a demand shock convergence, its impact on the supply shocks is in the opposite (diverging) direction.