A Model to Simulate the Convergence Process in the EU and in the Balkans Region Based on Empirical Evidence

Abstract

In the context of many new challenges for the EU economy, convergence continues to be one of the main goals in the long run. This paper provides empirical evidence in support of a significant trend of convergence for the EU28 countries after 2000. Investigating the drivers of this trend, we concurrently developed an analysis of convergence for each of the three EU conventional groups and we document rather different results, i.e. strong convergence for the group of former eastern communist countries (EU11E), slow convergence in the group of Southern countries (EU6S), and a trend of slow divergence for the group of North-Western countries (EU11NW). Moreover, taking into account the new Western Balkan candidate countries (EU6B, comprising Albania, Bosnia and Herzegovina, Kosovo, North Macedonia, Montenegro, and Serbia), we analyzed the convergence among these four groups of countries in an extended EU, conventionally denoted as EU34. Our study suggests the existence of complex dynamics that feature the EU34 economic system of heterogeneous economies. When separating the region into two zones based on the average level of income per capita, we notice completely different behaviors: on the left side an accelerated convergence to the average level of the system prevails, while the right side features a general slow divergence interrupted by some periods of convergence; the distribution could be far from a normal distribution for which the behavior is linear; around the average level, the behavior may change dramatically, uncovering an instability sub-zone, with higher stability only far from the average level on the right side. Keywords: European Union, Balkans region, Convergence, Divergence, Economic Growth, Behavioural regimes