Convergence of public expenditures and revenues in EU28 during 2002–2019: Evidence from club‐clustering analysis before and after the European debt crisis

Abstract

AbstractThis paper explores the convergence of public expenditures and revenues in the EU28 by applying the panel cluster convergence methodology to updated quarterly data for the period 2002–2019. In order to explore whether the recent debt crisis in EU has affected the harmonisation path, the paper, for the first time, considers both the whole period 2002–2019 and two equally‐sized sub‐periods, that is, 2002–2009 and 2012–2019, which correspond to pre‐and post‐debt‐crisis years. The issue is important for the debate on fiscal harmonisation in Europe, given that the EU's debt crisis has generated many asymmetries across the member states, whilst the design of effective public policies remains a key tool for achieving higher economic growth. Overall, our results provide evidence of divergence, especially for public expenditures since the European debt crisis, which suggests that in the future further efforts towards a stronger harmonisation path will be required by policymakers in EU member states.