Some new insights on economic convergence and growth in Central, Eastern, and Southeastern Europe
- PDF / 1,005,899 Bytes
- 22 Pages / 439.37 x 666.142 pts Page_size
- 74 Downloads / 168 Views
Some new insights on economic convergence and growth in Central, Eastern, and Southeastern Europe Dimitar Eftimoski1,2
© Springer Science+Business Media, LLC, part of Springer Nature 2019
Abstract The existing empirical literature on economic convergence and growth emphasizes the importance of foreign capital inflows for the Central, Eastern, and Southeastern European (CESEE) countries. This paper challenges such arguments by stating that not all forms of foreign capital inflows are beneficial for the economic growth of CESEE countries. Our results suggest that remittances (as an alternative foreign capital inflow) tend to slow down economic growth. Moreover, apart from the prevailing trends to investigate the economic convergence of CESEE towards Western European countries, this paper focuses on economic convergence within the CESEE region, that is, on economic convergence of the non-EU CESEE countries towards EU CESEE countries. We found that, in the last two decades, the living standard in the CESEE region has become increasingly equal. There is a tendency for poorer non-EU CESEE countries to grow faster than richer EU CESEE countries, which confirms the existence of absolute 𝛽-convergence. We have also found that each CESEE country converges 2.8% closer to its own steady state, in the sense of conditional 𝛽 , every year. Keywords Economic convergence · Economic growth · Foreign capital inflows · CESEE countries
1 Introduction There is no end of empirical debate on economic convergence. It was initiated in the mid 1980’s with the papers of Abramovitz (1986) and Baumol (1986), and was substantially intensified during 1990’s with the papers of Barro (1991), Barro and Salai-Martin (1991, 1992, 1995), Mankiw et al. (1992), and Caselli et al. (1996), among * Dimitar Eftimoski [email protected] 1
St. Clement of Ohrid University, str. Partizanska bb, 7000 Bitola, Macedonia
2
Faculty of Business Economics – Skopje, str. “3‑ta Makedonska Brigada” 66A – Floor 1, 1000 Skopje, Macedonia
13
Vol.:(0123456789)
Empirica
others. Macroeconomists want to know whether differences among countries, in terms of real GDP per capita, are temporary or permanent, that is, whether poor countries’ standard of living will converge towards that of rich countries over time. If poor countries tend to grow faster than rich ones,1 then there is absolute (unconditional) 𝛽-convergence. If the dispersion of real GDP per capita for a group of countries tends to decrease over time, then there is 𝜎-convergence. These two concepts are related. If poor and rich countries’ standards of living tend to converge over time, then it must be the result of faster growth of poor countries, which implies that a necessary condition for the existence of 𝜎-convergence is the existence of absolute 𝛽-convergence.2 The concept of absolute 𝛽-convergence assumes that the only difference across countries is their initial level of real GDP per capita. This assumption is highly questionable since it implies that all countries converge to the same steady sta
Data Loading...