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Economic Convergence and Divergence in Europe

Economic Convergence and Divergence in Europe

Growth and Regional Development in an Enlarged European Union

Edited by Gertrude Tumpel-Gugerell and Peter Mooslechner

This highly topical book addresses the challenge of economic convergence within Europe, beginning with a thorough review of the theory of growth and related empirical research. Historical and more recent economic developments within the present EU and current accession countries are discussed, along with the design for the process of further integration of accession countries into the EU and the Euro area. Moreover, the potential to achieve a sustainable catch-up process in Western Balkan countries, the Ukraine and Russia is explored, focusing on the task facing the EU in designing proper policies vis-à-vis these countries. The contributors’ varied perspectives ensure that the theories and policies postulated are linked closely with the actual situation in accession countries and offer up-to-date insights.

Chapter 3: The impact of European integration on growth: what can we learn for EU accession?

Jesús Crespo-Cuaresma, Maria Antoinette Dimitz and Doris Ritzberger-Grunwald

Subjects: economics and finance, regional economics, urban and regional studies, regional economics


Jesús Crespo-Cuaresma, Maria Antoinette Dimitz and Doris Ritzberger-Grünwald1 3.1. INTRODUCTION For the last 50 years there has been widespread discussion about the economic consequences of European integration. The basic questions are: Is economic integration growth enhancing? Are the rich getting richer and the poor getting poorer, or will the income levels of the EC/EU member countries converge as a consequence of integration? Furthermore, which countries will profit most from intensified trade among the members? The theoretical literature on economic growth has gone through several phases, and the answers to the above questions depend on the specification of the respective growth model. From the late 1950s to the mid-1980s the simple Solow–Swan ‘exogenous growth model’ dominated the literature (Solow 1956). According to the neoclassical theory, the economy converges towards a steady state due to diminishing returns to investment in physical capital. Assuming a constant population, the long-run growth rate is solely determined by the rate of technological change, which is assumed to be exogenous. As the growth rate is therefore independent of any economic behaviour, economic policy changes will only have a temporary effect on economic activity. The same is true for economic integration. Technological change is considered a public good common to all countries, so that they all share the same long-run growth rate determined by technological progress alone. Therefore the integrated economy will expand along this unchanged steady state growth path in the long run, and the reallocation of resources will only...

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