TESTING BETA CONVERGENCE ACROSS EU28 AND EU15 COUNTRIES

Abstract

In the attempt to answer the question whether the poorer economies will catch up the economies of the richerones over time, more and more studies on the convergence found that measuring any imbalance between countries exhibita great interest. Whereas at present there is a great diversity of research and approaches to convergence and a huge variety of calculation methodologies, in this paper we present one of the concepts that asserted itself in the process of real convergence namely the beta convergence (β). Although this concept has been contested by some economists like Friedman (1992) and Quah (1993) who state that the regression model of economic growth used can give awrong indication of the presence and expansion of beta convergence, the concept of beta convergence was asserted in the economic literature. It has become an indispensable instrumentfor the measurement, the econometric analysis and description of this process, when considered either in its incipient simple form (absolute beta convergence) or in its developed form (beta conditional convergence).Thus, to identify a possible convergence process or rather a trend of divergenceamong European economies, we have investigated the relationship between the average annual growth rate of the GDP per capita for the period of time T and the initial level of the GDP per capita in the year t0, employing the methodology proposed by Barro and Sala-i-Martin namely estimating an equation for economic growth. To estimate this equation for the UE 28 and UE 15 countries we haveusedannual statistical data for 2000 – 2014 collected from Eurostat.Results revealed a strong correlation between the variables for the EU 28 countries, while for the EU-15 countriesthe estimations revealed a weak one.As a conclusion, the new member states of the European Union have enjoyed a high rate of real convergence compared to older member states. This confirms the theory that the poorer economies have certain advantages in terms of economic growth compared to richer ones, allowing them to grow faster and recover such disparities between them