COUNTRY-SPECIFIC CONVERGENCE BEHAVIOR IN AN ENLARGED EUROPE


Pehlivan G. G., UTKULU U.

12th Conference of the Eurasia-Business-and-Economics-Society (EBES), Singapore, Singapore, 9 - 11 January 2014, pp.87-100 identifier

  • Publication Type: Conference Paper / Full Text
  • Volume:
  • City: Singapore
  • Country: Singapore
  • Page Numbers: pp.87-100
  • Keywords: Economic Integration, Enlargement Process, Convergence, Common Correlated Effect Model
  • Dokuz Eylül University Affiliated: Yes

Abstract

By reason of economic pressures of globalization and increased competition, countries need to take part in an economic integration. European Union is the main interest of this paper on account of the long-established integration from 1950's. This paper examines the process of convergence in relative GDP per capita across European Union countries and candidate countries, and investigates the effects of trade openness, changes in economic activities and government consumption in the growth process. We present second generation panel cointegration tests of the theory for the European Union countries and candidate countries for the period 1990-2011. In the first step, we tested heterogeneity and cross-section dependence among countries and found that all series have cross-section dependence. For that reason, we used second generation panel unit root and panel cointegration tests. These tests have the consideration of cross-section dependence, so it is important to consider this to improve the reliability of the estimation results. This paper also gives country-specific conditional and unconditional convergence results at the long-run model via using Common Correlated Effect Model. This contribution provides crucial information about the European Union countries and candidate countries.