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The Promised Land Or A Mirage? The Puzzling Divergence Of The European Union'S Periphery

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  • João Alcobia

Abstract

Using a Balance-of-Payments Constrained Growth model and a Convergence Quadrants Diagram this paper finds evidence of economic divergence of most European Union (EU) peripheral member states and the EU average between 1996 and 2019. In only two cases – Spain and Cyprus – do we find a trend of economic convergence, but which was of an unsustainable nature since it was accompanied by growing external imbalances. Further, using a productivity convergence/divergence model this paper again finds evidence of productivity divergence between peripheral member states and the EU average between 1996 and 2019, though it finds evidence of productivity convergence between 1996 and 2008. In the 2009-2019 period, productivity divergence was driven by a more pronounced reduction in the income elasticity of exports than in the income elasticity of imports and by a reduction in the importance of economies of scale.

Suggested Citation

  • João Alcobia, 2023. "The Promised Land Or A Mirage? The Puzzling Divergence Of The European Union'S Periphery," Working Papers REM 2023/0273, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    • Handle: RePEc:ise:remwps:wp02732023
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    Cited by:

    1. João Alcobia & Ricardo Barradas, 2023. "Functional Income Distribution And Secular Stagnation In Europe: An Analysis Of The Post-Keynesian Growth Drivers," Working Papers REM 2023/0283, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.

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    More about this item

    Keywords

    Balance-of-Payments Constrained Growth; Convergence Quadrants Diagram; productivity convergence/divergence model; peripheral member states; economies of scale.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • F15 - International Economics - - Trade - - - Economic Integration
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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