European Integration and Income Convergence : Lessons for Central and Eastern European Countries

European Integration and Income Convergence : Lessons for Central and Eastern European Countries

The prospect of enlarging the European Union (EU) to Central and Eastern European countries with income levels far below those of present members, questions how, and when the candidates' aspiration to converge towards EU standards of living, c...

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Bibliographic Details
Main Authors:	Martin, Carmela, Velazquez, Francisco J., Funck, Bernard
Format:	Publication
Language:	English en_US
Published:	Washington, DC: World Bank 2013
Subjects:	EUROPEAN INTEGRATION EUROPEAN UNION CONVERGENCE (ECONOMICS) INCOME LEVELS EUROPEAN UNION MEMBERSHIP STANDARD OF LIVING REGIONAL INTEGRATION TECHNOLOGICAL CHANGE FOREIGN DIRECT INVESTMENTS MACROECONOMIC STABILITY COMPETITION POLICY HUMAN CAPITAL REGIONAL POLICY AVERAGE INCOME BASE YEAR CAPITAL ACCUMULATION CAPITAL INVESTMENTS CD COMMON TRADE POLICY CONVERGENCE HYPOTHESIS CONVERGENCE PROCESS CRITICAL SURVEY CROSS COUNTRY DIFFERENCES IN INCOME ECOLOGY ECONOMIC COMMUNITY ECONOMIC CONVERGENCE ECONOMIC GROWTH ECONOMIC INTEGRATION ECONOMIC REFORM ECONOMIC RESEARCH ECONOMIC WELFARE ECONOMICS EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EMPIRICAL LITERATURE EMPIRICAL RESEARCH EMPIRICAL STUDIES EMPLOYMENT ENDOGENOUS GROWTH ENVIRONMENTAL PERFORMANCE EXCHANGE RATE EXCHANGE RATE FLUCTUATIONS EXCHANGE RATES EXPLANATORY FACTORS EXTERNALITIES FINANCIAL CRISES FIXED COSTS FOREIGN INVESTMENT FOREIGN TRADE FOREST MANAGEMENT FREE TRADE FREE TRADE AREA GDP GDP PER CAPITA GROSS FIXED CAPITAL FORMATION GROWTH LITERATURE GROWTH MODEL GROWTH MODELS GROWTH PERFORMANCE GROWTH THEORY IMPORTING COUNTRY INCOME INCOME CONVERGENCE INCOME DISTRIBUTION INCOME DISTRIBUTION DATA INCOME DISTRIBUTIONS INCOME GAPS INCOME INEQUALITY INCOMES INCREASING RETURNS INDUSTRIALIZED COUNTRIES INFANT INDUSTRY ARGUMENT INTEGRATING AREA INTEREST RATES INTERMEDIATE GOODS INTERNAL TRADE INTERNATIONAL TRADE INTERNATIONAL TRADE POLICY INVESTMENT INFLOWS KNOWLEDGE SPILLOVER LABOR PRODUCTIVITY LABOUR PRODUCTIVITY LEGAL STATUS LONG RUN MACROECONOMIC POLICIES MARGINAL PRODUCT MEMBER COUNTRIES MEMBER STATES MONETARY UNION NATIONAL POLICIES NATIONAL] POLICIES NEOCLASSICAL GROWTH NEOCLASSICAL GROWTH MODEL NEOCLASSICAL GROWTH THEORY OPEN ECONOMIES PER CAPITA GROWTH PER CAPITA INCOME POOR COUNTRIES POSITIVE EXTERNALITIES POVERTY REDUCTION PREFERENTIAL TRADING PREFERENTIAL TRADING AGREEMENTS PRODUCTIVITY PRODUCTIVITY GROWTH PUBLIC CAPITAL PURCHASING POWER RETURNS TO SCALE RISK PREMIUM STABILIZATION POLICIES STRUCTURAL CHANGE TECHNICAL PROGRESS TECHNOLOGICAL INNOVATION TECHNOLOGY SPILLOVERS TECHNOLOGY TRANSFER TRADE INTEGRATION TRADE LIBERALIZATION TRADE OPENNESS TRADE THEORY TRANSACTION COSTS TRANSITION ECONOMIES TRANSITION PROCESS TRANSPORT COSTS WATER PRICING WEALTH WELFARE EFFECTS WELFARE GAINS
Online Access:	http://documents.worldbank.org/curated/en/2001/08/1561428/european-integration-income-convergence-lessons-central-eastern-european-countries http://hdl.handle.net/10986/13968

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Summary:	The prospect of enlarging the European Union (EU) to Central and Eastern European countries with income levels far below those of present members, questions how, and when the candidates' aspiration to converge towards EU standards of living, could possibly by fulfilled. To address these questions, this paper seeks to assess of the convergence experience of the four less developed EU members, i.e., Spain, Portugal, Ireland, and Greece, after joining the EU, and, to explore what lessons can be learned from that experience. The discussion suggests that, while theoretically possible, there is little empirical reason to fear that European integration would cause economies to diverge. Rather than being spontaneous, however, real convergence would seem to depend crucially, on the capacity of countries to tap international technological spillovers, particularly through foreign direct investment. Macroeconomic stability, effective competition on goods, and factor markets, and, a good human capital endowment are essential to harness benefits. Nonetheless, lingering worries about the possibility that integration would lead to real divergence between countries, or regions of Europe, has led to the creation of large transfers under the EU's Regional Policy. Pending more conclusive evidence of their effectiveness, the candidate countries would seem wise to put greater store by those domestic policies, than by EU grants to fuel their convergence.

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