An Analysis of Progress Toward EU Macroeconomic and Environmental Indicator Convergence

Abstract

The purpose of this paper is to examine and update the progress toward meeting the macroeconomic and environmental “convergence criteria” outlined in original Maastricht Treaty of 1991, and the Kyoto Protocol of 1997 and its successor climate agreements. Using recently developed econometric models of convergence, this study presents an inventory of the convergence properties of 12 macroeconomic and environmental indicators for a sample of 15 EU member countries with data for the period 1990-2020. While not exhaustive, it is representative of widely accepted macroeconomic and environmental indicators used to gauge progress toward achieving the stated EU convergence criteria, including some that to our knowledge have not yet been formally studied for convergence. We also give an example of how using an inappropriate convergence model can lead to incorrect and misleading results, and suggest a testing strategy to obtain more reliable results. Using the appropriate convergence model, we found evidence for weak Sigma-convergence in 5 of the 12 indicators (4 macroeconomic and 1 environmental). Thus progress toward EU economic and environmental convergence remains mixed.