Real convergence in Europe: A cluster analysis

In this paper we analyse real convergence in GDP per worker in the EU member states. The aim is to test whether there is evidence of club convergence in the EU, i.e. divergence in GDP per worker. Evidence in favour of cluster or club convergence may be an indication of significant productivity divergences between countries, which may also explain the current turmoil in the euro zone. The results show evidence of different economic growth rates within Europe, which also converge to different steady states, implying divergence in the EU-14. Within the EU-14 member states we observe two convergence clubs, which are not related to the fact that some countries belong to the euro area. Furthermore, Eastern European countries are also divided in two clubs, with a more direct effect of belonging to the euro zone in the composition of the clubs.     

Distribution Dynamics of CO<Subscript>2</Subscript> Emissions

This paper uses nonparametric methods to examine the convergence in CO₂ emissions per capita on a sample of 100 countries for the period 1966–1996. Industrial countries show a convergence pattern. However, there is little evidence of convergence for the whole sample.     

Analysing convergence in Europe using the non-linear single factor model

We investigate convergence in European price level, unit labour cost, income and productivity data over the period of 1960–2006 using the non-linear time-varying coefficients factor model proposed by Philips and Sul (2007 Econometrica 75:1771–1855). This approach is extremely flexible in order to model a large number of transition paths to convergence. We find regional clusters in consumer price level data. GDP deflator data and unit labor cost data are far less clustered than CPI data. Income per capita data indicate the existence of three convergence clubs without strong regional linkages; Italy and Germany are not converging to any of those clubs. Total factor productivity data indicate the existence of a small club including fast-growing countries and a club consisting of all other countries.     

Convergence patterns in financial development: evidence from club convergence

This article analyzes the degree of convergence of financial development for a panel of 50 countries. We apply the methodology of Phillips and Sul (Econometrica 75:1771?C1855, 2007) to various indicators of financial development to assess the existence of convergence clubs. We consider ten alternative indicators of financial development that various researchers use to proxy for the degree of financial development in countries. Overall, the results do not support the hypothesis that all countries converge to a single equilibrium state in financial development. Nevertheless, strong evidence exists of club convergence. Countries demonstrate a high degree of convergence in the sense that in the majority of financial indexes they form only two or three convergence clubs, depending on the measure of financial development used. We also apply the Phillips and Sul method to two real variables, per capita output and fixed capital investment to GDP, and find strong evidence of five and four distinct convergence clubs, respectively. Finally, we compare the various convergence clubs associated with financial development indicators to those clubs for per capita output and fixed capital investment to GDP. We conclude that strong evidence supports the correspondence between the convergence clubs for financial development and those two real variables.     

New evidence on the convergence of international income from a group of 29 countries

This paper updates and extends the time-series evidence on the convergence of international incomes using a set of 29 countries over the period 1900–2001. Time-series tests for stochastic convergence are supplemented with tests which provide evidence on the notion of “β-convergence” predicted by the Solow model. The evidence indicates that the relative income series of 21 countries are consistent with stochastic convergence, and that β-convergence has occurred in at least 16 countries at some point during the twentieth century. Further examination of the properties of the β-convergence test provides anecdotal evidence of conditional convergence in three additional countries for which the convergence hypothesis was initially rejected. Consideration of convergence clubs strengthens the evidence in favor of convergence. Analysis of the cross-country dispersion of incomes over time also suggests that convergence has occurred over the 1900–2001 period, particularly within certain clubs, with structural breaks associated with World War II in many countries causing a break in the convergence process.      

The Stochastic Convergence of CO<Subscript>2</Subscript> Emissions: A Long Memory Approach

In response to equity concerns surrounding the spatial distribution of CO₂ emissions and assumptions of CO₂ convergence within some climate models, this paper examines the convergence of CO₂ emissions within the OECD over the period 1870–2004. More specifically, using the Local Whittle estimator and its variants we examine whether relative per capita CO₂ emissions are fractionally integrated, that is they are long memory processes which, although highly persistant, may revert to the mean/trend in the long run. Our results suggest that CO₂ emissions within 13 out of 18 OECD countries are indeed fractionally integrated implying that they converge over time, albeit slowly. Interestingly though, the countries whose emissions are not found to be fractionally integrated are some of the highest polluters within the OECD, at least in per capita terms. Our results have implications both for future studies of CO₂ convergence and for climate policy.     

Regional convergence clubs in Europe: Identification and conditioning factors

The aim of this paper is to empirically identify convergence clubs in per capita incomes of European regions and to investigate whether initial conditions − as suggested by the club convergence hypothesis − are responsible for club formation. To tackle this issue, we propose a two-step procedure in which we first endogenously identify groups of regions that converge to the same steady state level, and in a second step we investigate the role of starting conditions and structural characteristics for a region's club membership. Our sample comprises 206 European NUTS2 regions between 1990 and 2002. The results strongly support the existence of convergence clubs, indicating that European regions form six separate groups converging to their own steady state paths. Moreover, estimates from an ordered logit model reveal that the level of initial conditions such as human capital and per capita income plays a crucial role in determining the formation of convergence clubs among European regions.     

Stochastic Divergence or Convergence of Per Capita Carbon Dioxide Emissions: Re-examining the Evidence

This paper revisits the time-series literature on the convergence of per capita carbon dioxide (CO₂) emissions and examines the robustness of previous results. Using a sample of OECD countries for the period 1950–2002 we employ a battery of stationarity and unit root tests including those that allow for cross-sectional dependencies within the panel. We also correct for inaccuracies in previous studies that could result in a trend-stationary series being labelled as converging even if it were actually diverging from the international average. The body of evidence provided by our analysis suggests that per capita CO₂ emissions have not converged among OECD countries during the period under consideration. This finding is of importance to both climate change policy makers and to those who construct climate change models.      

PERSISTENCE IN CONVERGENCE AND CLUB FORMATION

In this paper, we examine the convergence hypothesis using a long memory framework that allows for structural breaks and does not rely on a benchmark country using both univariate and multivariate estimates of the long memory parameter d. Using per capita GDP gaps, we confirm the findings of non‐stationarity and long memory behavior that have been found previously in the literature using univariate tests. However, the support for these findings is much weaker when using a multivariate framework, in which case we find more evidence of stationary behavior. Based on these results, we also investigate club formation, something that would suggest the presence of conditional convergence. We describe a club formation methodology using the sequential testing criteria that we have employed in our analysis as the basis for forming clusters or clubs of countries with similar convergence characteristics.     

Energy productivity convergence: new evidence from club converging

The goal of this study is to explore the convergence of energy productivity across 31 countries from 1972 to 2012 by using the convergence club algorithm developed by Phillips and Sul (2007). The empirical results lead to the rejection of full convergence and to the presence of a certain number of clubs. The transitional curves, however, indicate that over the long run energy productivity tends to converge, indicating the strong attempts of the countries under investigation to adopt energy policies that eventually contribute to a convergence pattern.     

Club convergence analysis of regional ecological efficiency in China

This paper adopts a network data envelopment analysis (DEA) model combined with a window analysis approach to evaluate the ecological efficiency (eco‐efficiency) of 30 regions in China over 2000–2015. We also investigate the existence of eco‐efficiency convergence clubs among these regions and analyse the important factors that drive eco‐efficiency club formation. Our results reveal that, overall, Chinese regional eco‐efficiency deteriorated from 2000 to 2015. We find that there is a significant regional disparity in eco‐efficiency. Our convergence analysis indicates that Chinese regions converge into three eco‐efficiency clubs, suggesting that common economic and environment policies might have a limited impact on promoting regional eco‐efficiency and regionally‐tailored policies need to be designed. Finally, we find that forest coverage, R&D expenditure and pollution punishment are important determinants of convergence club membership.     

US state health expenditure convergence: A revisited analysis

This paper studies the evolution of US state health expenditure for a sample that covers 1966–2014. Our results provide evidence against the existence of a single pattern of behavior of personal health care expenditure across the US states. Rather, we can observe the existence of two statistically different convergence clubs. We cannot find evidence of convergence when we disaggregate health expenditure into its three main payers: Medicare, Medicaid and private health insurance expenditure, whilst we again find evidence of convergence clubs. However, the estimated clubs for Medicaid and private health insurance expenditure are statistically different that estimated for total health expenditure. Consequently, our results offer strong evidence of heterogeneity in the evolution of US health expenditure. The analysis of the forces that drive club creation shows that economic situation and some supply-side factors are important. We can also appreciate that some healthcare outcome variables are only related to private insurance health expenditure. The other health expenditures, thus, show a certain lack of efficiency which may be due to practices that have little benefit for patient health.     

Testing for Convergence in Carbon Dioxide Emissions Using a Century of Panel Data

This paper tests the convergence in per-capita carbon dioxide emissions for a collection of developed and developing countries using data spanning the period 1870–2002. For this purpose, three recently developed panel unit root tests that permit for dependence among the individual countries are employed. The results lend strong support in favor of convergence for the panel as a whole. Estimates of the speed of this convergence is also provided.      

Nonlinearities in economic growth and club convergence

This paper deals with heterogeneity and nonlinearities in the growth process by developing a two-stage strategy to identify and estimate a club convergence model with threshold externalities. Because of identification and collinearity problems, we develop an entropy-based estimation procedure which simultaneously takes account of ill-posed and ill-conditioned inference problems. First, clubs are identified by introducing a mapping structure in a conditional convergence model. Finally, we estimate a multiple club convergence model, where clubs correspond to subsets of total observations. Our procedure is applied to assess the existence of club convergence for a large sample of countries (1965–2008).     

Is eco-efficiency in greenhouse gas emissions converging among European Union countries?

Eco-efficiency refers to the ability to produce more goods and services with less impact on the environment and less consumption of natural resources. This issue has become a matter of concern that is receiving increasing attention from politicians, scientists and researchers. Furthermore, greenhouse gases emitted as a result of production processes have a marked impact on the environment and are also the foremost culprit of global warming and climate change. This paper assesses convergence in eco-efficiency in greenhouse gas emissions in the European Union. Eco-efficiency is assessed at both country and greenhouse-gas-specific levels using Data Envelopment Analysis techniques and directional distance functions, as recently proposed by Picazo-Tadeo et al. (Eur J Oper Res, 220:798–809, 2012). Convergence is then evaluated using the Phillips and Sul (Econometrica, 75:1771–1855, 2007) approach that allows testing for the existence of convergence groups. Although the results point to the existence of different convergence clubs depending on the specific pollutant considered, they signal the existence of at least four clear groups of countries. The first two groups are core European Union high-income countries (Benelux, Germany, Italy, Austria, the United Kingdom and Scandinavian countries). A third club is made up of peripheral countries (Spain, Ireland, Portugal and Greece) together with some Eastern countries (Latvia and Slovenia), while the remaining clubs consist of groups containing Eastern European countries.     

Inflation convergence in Central and Eastern Europe vs. the Eurozone: Non‐linearities and long memory

In this paper, we consider inflation rate differentials between seven Central and Eastern European Countries (CEECs) and the Eurozone. We test for convergence in the inflation rate differentials, incorporating non‐linearities in the autoregressive parameters, fractional integration with endogenous structural changes, and also consider club convergence analysis for the CEECs over the period 1997 to 2015 based on monthly data. Our empirical findings suggest that the majority of countries experience non‐linearities in the inflation rate differential; however, there is only evidence of a persistent difference in some countries. Complementary to this analysis we apply the Phillips and Sul (2007) test for club convergence and find that there is evidence that most of the CEECs converge to a common steady state.     

Assessing economic convergence in the EU: is there a perspective for the ‘cohesion countries’?

This article analyses the stochastic income convergence within the EU-15. The empirical analysis uses per capita GDP, in PPP and in constant prices of 2005 for the period 1950 to 2010. Apart from the traditional DF type tests we also account for possible structural changes. In this direction, we employ the Zivot-Andrews (1992) and the Lee-Strazicich (1999, 2003) testing procedures, for one and two breaks, endogenously determined. Furthermore, we apply the Carlino and Mills (1993) methodology proposed for the detection of β-convergence. The overall evidence supports the existence of two discrete clubs, the first by the ‘cohesion countries’ (Portugal, Ireland, Greece and Spain) and the second by the remaining members. In particular, there is a clear evidence of convergence within each club, whereas between clubs there is a luck of catching-up effects. Furthermore, investigation of correlation between relative per capita GDP of each country and several factors that are often identified as growth stimulants, namely Total Factor Productivity, FDI, investment and openness confirm, with the exception of Greece, a strong association between these factors and the convergence process. However, progress in the convergence has not been uniform across countries and over time, reflecting the specific interactions between domestic and international factors and their impact on the convergence process of individual countries.     

OLD WINE IN A NEW BOTTLE: TRADE OPENNESS AND FDI FLOWS—ARE THE EMERGING ECONOMIES CONVERGING?

This study uses the club convergence methodology of Phillips and Sul (2007) for emerging economies spanning the period 1960–2013 to explore whether such convergence exists and whether the increase of international trade and foreign direct investment (FDI) flows has been a global or club phenomenon. We find the absence of a homogeneous convergence club. The results for FDI outflows also reach similar conclusions, suggesting the formation of convergence clubs by stage of development. These results suggest that policies that promote convergence in trade openness and FDI flows would permit countries to benefit from mutual interactions and by greater consistency and efficiency in trade regimes, thus permitting these countries to benefit from openness leading to a race to the top rather than bottom. (JEL F41, C33)     

Sectoral Energy- and Labour-Productivity Convergence

This paper empirically investigates the development of cross-country differences in energy- and labour productivity. The analysis is performed at a detailed sectoral level for 14 OECD countries, covering the period 1970–1997. A σ-convergence analysis reveals that the development over time of the cross-country variation in productivity performance differs across sectors as well as across different levels of aggregation. Both patterns of convergence as well as divergence are found. Cross-country variation of productivity levels is typically larger for energy than for labour. A β-convergence analysis provides support for the hypothesis that in most sectors lagging countries tend to catch up with technological leaders, in particular in terms of energy productivity. Moreover, the results show that convergence is conditional, meaning that productivity levels converge to country-specific steady states. Energy prices and wages are shown to positively affect energy- and labour-productivity growth, respectively. We also find evidence for the importance of economies of scale, whereas the investment share, openness and specialization play only a modest role in explaining cross-country variation in energy- and labour-productivity growth.