Income convergence clubs in the Eurozone: a tale beyond the core/periphery divide

José García Solanes, Arielle Beyaert and Laura Lopez-Gomez

Applied Economic Analysis, 2024, vol. 33, issue 97, 1-18

Abstract: Purpose - This paper aims to examine income convergence among the Euro members from 1995 to 2021. Design/methodology/approach - This study uses Phillips and Sul’s test (2007, 2009) extended by Lyncker and Thoennessen’s (2017) algorithm jointly withβandσ – convergence analysis and a traditional growth equation. Findings - This analysis identifies three clubs of countries in terms of gross domestic product (GDP) per capita with notable disparities between and within them, which implies that the theory of optimal currency areas has not been fulfilled. Originality/value - These results rule out the core/periphery divide as presented in the literature to date. Finally, by estimating an endogenous economic growth model, this study finds the primary factors underpinning the differences between the three stationary states: labor productivity, physical and human capital, investment and international trade.

Keywords: Income convergence; Eurozone; Economic integration; OCA theory; F15; F50; O10; O52 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:aeapps:aea-02-2024-0085

DOI: 10.1108/AEA-02-2024-0085

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