Estimates of Time to Economic Convergence: An Analysis of Regions of the European Union

Abstract

According to the simplest neoclassical theory, closer integration will ultimately eliminate the current differences in per capita incomes between European Union (EU) regions. Models based on the Keynesian tradition and endogenous growth theory suggest different outcomes. This article looks at the evidence for convergence along neoclassical lines and also from a point of view that accepts the critique of neoclassical theory. Estimates are made of the time it will take for two different forms of equilibrium to be realized. From a neoclassical perspective, there is only weak evidence that EU regions are converging in terms of their output per capita, requiring more than two centuries for approximate convergence to be achieved. From a non-neoclassical perspective, stochastic equilibrium will require more than three centuries, although the hypothesis that the regions have already achieved stochastic equilibrium cannot be dismissed.