Long term economic convergence among ten new EU member states in the light of the economic crisis

Abstract

This paper provides an analysis of absolute economic convergence among the group of ten new member states (NMS-10) that entered European Union in the year 2004. Convergence dynamics is estimated for the period from 1997 to 2012 as well as for two sub-periods: 1997-2007 and 2007-2012. The analysis covers aspects of sigma- (If-) and beta- (I2-) convergence. Convergence is first estimated by testing for panel unit root in GDP per capita series and then by using standard cross-section equations for absolute convergence. Different time intervals were used so that the analysis could capture the impact of the global economic crisis on long-term convergence performance among the NMS-10 countries. Our results show that this group of countries formed one homogenous convergence club during the entire observed period and achieved high convergence rates in the period before the crisis, while the level of homogeneity in the NMS-10 convergence club was significantly diminished in the period after beginning of the crisis.