A note on regional convergence within the EU

Abstract

A recently published article suggested that factor prices within the EU converged between 1980 and 1992 but diverged between 1992 and 1994. However, these findings largely reflect inflation differentials and exchange rate adjustments. Markov chain analysis on the basis of an alternative income aggregate, GDP per capita measured in Purchasing Power Standards, leads to different results: Convergence was close to non-existent from 1980 to 1994 but resumed significantly thereafter. This is likely to be attributable to the establishment of the Single Market and subsequent integration steps.