TESTING FOR CONVERGENCE OF THE EU REGIONAL ECONOMIES
KENNETH J. BUTTON ERIC J. PENTECOST*
 
*Kenneth Button is Director of the Centre for Research in European Economics and Finance, Loughborough University, England and VSB Visiting Professor of Transport and the Environment, Tinbergen Institute, Netherlands. Eric Pentecost is Senior Lecturer in Economics, Loughborough University, England and Visiting Professor of Economics, Vanderbilt University, USA. They are grateful for the financial support of the Economic and Social Research Council (grant R000 23 4024) and to three referees for their constructive comments.

Copyright 1995 Western Economic Association
ABSTRACT
We examine changes in the economic performance of Western European regional economies, in particular, the degree of convergence in their economic performance (as measured by the growth of GDP per capita) since the mid 1970s when the larger European Union was established. Although results of simple model specifications suggest convergence has occurred, a more completely specified model, which includes structural variables, county dummies and an EM dummy, shows no significant convergence across the European Union s regions in the 1980s.

 

Convergence behaviour in
exogenous growth models
Jochonia S Mathunjwa and Jonathan R W Temple?
Department of Economics, University of Bristol
8 Woodland Road, Bristol BS8 1TN
August 3, 2006
Abstract
This paper analyzes several aspects of convergence behaviour in the Solow
growth model. In empirical work, a popular approach is to log-linearize around
the steady-state. We investigate the conditions under which this approximation
performs well, and discuss convergence behaviour when an economy is some
distance from the steady-state. A formal analysis shows that convergence speeds
will be heterogeneous across countries and over time. In particular, the Solow
model implies that convergence to a growth path from above is slower than
convergence from below. We find some support for this prediction in the data.
1 Introduction
The hypothesis of conditional convergence is central to the recent empirical growth
literature. The hypothesis is that any given country can be viewed as converging to
a balanced growth path, and the country?s distance from this balanced growth path
will influence its growth rate. Countries a long way below their steady-state path
will show relatively fast growth, while countries a long way above their steady-state
position will grow relatively slowly, and perhaps even see reductions in GDP per
worker. In general, if we control for the determinants of the level of the steady-state
path, countries that are relatively poor will grow more quickly.
From the perspective of traditional time series analysis, this is really not much
more than a partial adjustment model. Models of economic growth add to this by
making quantitative predictions about the speed at which economies will converge
towards the long-run equilibrium. Testing these predictions may be informative
about key structural parameters. The rate at which countries converge to a steadystate
path also tells us whether transitional dynamics or steady-state behaviour play
the dominant role in observed patterns of growth rates. For economies that take
a long time to converge to their steady-state, transitional dynamics are important,