3 research outputs found
Trade, governance and income convergence in the European Union: Evidence on the "theory of relative backwardness"
No full textAt the core of the formation of the European Union (EU) in 1993 was the economic goal to create a European Common Market to ensure freer trade and perhaps to create an egalitarian Europe. The post-1993 period saw the biggest enlargement of the EU to date from a meagre 3 member countries (Benelux) at the dawn of its creation to now 28 member countries, imposing a unique and dominating feature in terms of its range and size in the world economic milieu. Obviously, the cementing force behind such integrative process was an idea to create a more economically powerful and politically vibrant economic entity, which can compete against the mighty United States' economy. What motivates the backward region of the EU to join this strategic move? Undoubtedly, it was sheer hope and expectation to catch-up the economically more powerful nations of the Union by deriving benefits from the integration. There are proliferation of studies showing that convergence indeed had happened in the EU. Our study makes a humble attempt to shed light on the role of trade (both intra-EU and EU versus the world) and government expenditure in explaining per capita income convergence in the EU during the period of 1995-2017. As opposed to the standard neo classical approach, we have adopted the Theil inequality analysis in a panel data framework, which provides us with a much richer analytical framework to focus on the underlying factors determining the per capita income convergence in an open economy. The major finding of this paper is that policy intervention in the form of trade openness and government expenditure did contribute to per capita income convergence in the EU during the period of our study. Moreover, we are able to show that trade with the world and government expenditure enabled the relatively lower income countries to increase their per capita income to a greater extent in comparison to the relatively higher income countries, which eventually help in narrowing down the gap in per capita income across the countries of the EU. Additionally, we found that occasional shocks such as financial crisis could not reverse the convergence process
Economic integration and income convergence in the EU and the ASEAN
Full text linkAbstract. In this paper, examine per capita income convergence among the countries of the EU and the ASEAN during 2000-2014 using both beta and sigma convergence and theil index of inequality in order to to explain the process of structural change contributing to the process of income convergence. Our analysis of theil index of inequality indicates that the inter-country inequality, in general, has been decreasing for GDP in the EU and the ASEAN, which is in line with the findings of β- and σ- convergence for these two groups of countries during 2000-2014. While in the case of EU, reduction in inequality in the industrial sector has positively affected the reduction in inequality in income; for ASEAN, industrial and services sector have contributed to income convergence.Keywords. Convergence, EU, ASEAN, Theil Index of Inequality.JEL. O00, O10, O40
