Convergence in per-capita GDP across European regions: a reappraisal

  • Valentina Meliciani
  • Franco PeracchiEmail author
Part of the Studies in Empirical Economics book series (STUDEMP)

This paper studies convergence in per-capita GDP across European regions over the period 1980–2000. We use median unbiased estimators of the rate of convergence to the steady-state growth path, while allowing for unrestricted patterns of heterogeneity and spatial correlation across regions. By permitting the model parameters to be completely different across regions, not only we avoid imposing strong a priori assumptions but we are also able to analyze the spatial patterns in the estimated coefficients. Our results differ from those found using conventional estimators. The main differences are: i) the mean rate of convergence is much lower; ii) for most regions this rate is zero; iii) the number of regions for which we reject equality in trend growth rates is substantially lower. We also find significant evidence of correlation of growth rates across neighbor regions and across regions belonging to the same country.


Regional convergence Median unbiased estimation Heterogeneous panel models 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Andrews DWK (1993) Exactly median unbiased estimation of first order autoregressive/unit root models. Econometrica 61:139–165CrossRefGoogle Scholar
  2. Andrews DWK, Chen HY (1994) Approximately median unbiased estimation of autoregressive models. J Bus Econ Stat 12:187–414CrossRefGoogle Scholar
  3. Armstrong HW (1995) Convergence among regions of the European Union 1950–1990. Pap Reg Sci 74:143–152CrossRefGoogle Scholar
  4. Barro RJ, Sala-i-Martin X (1991) Convergence across states and regions. Brookings Pap Econ Act 137–158Google Scholar
  5. Bernard AB, Durlauf SN (1995) Convergence in international output. J Appl Econ 10:97–108CrossRefGoogle Scholar
  6. Bernard AB, Durlauf SN (1996) Interpreting tests of the convergence hypothesis. J Econom 71:161–173CrossRefGoogle Scholar
  7. Boldrin M, Canova F (2000) Inequality and convergence: reconsidering European regional policies. Econ Policy 32:207–253Google Scholar
  8. Breusch TV, Pagan AR (1980) The LM test and its applications to model specification in econometrics. Rev Econ Stud 47:239–254CrossRefGoogle Scholar
  9. Canjels E, Watson MW (1997) Estimating deterministic trends in the presence of serially correlated errors. Rev Econ Stat 79:184–200CrossRefGoogle Scholar
  10. Canova F, Marcet A (1995) The poor stay poor: non-convergence across countries and regions. CEPR Discussion Paper n. 1265Google Scholar
  11. Chipman JS (1979) Efficiency of least squares estimation of linear trend when residuals are autocorrelated. Econometrica 47:115–128CrossRefGoogle Scholar
  12. Cliff AD, Ord JK (1973) Spatial autocorrelation. Pion Limited, LondonGoogle Scholar
  13. Cochrane D, Orcutt GH (1949) Application of least squares regression to relationships containing autocorrelated error terms. J Am Stat Assoc 43:32–61CrossRefGoogle Scholar
  14. de la Fuente A (1996) On the sources of convergence: a close look at the Spanish regions. CEPR Discussion Paper n. 1543Google Scholar
  15. de la Fuente A (1998) What kind of regional convergence?. CEPR Discussion Paper n. 1924Google Scholar
  16. Dufour JM (1990) Exact tests and confidence sets in linear regressions with autocorrelated errors. Econometrica 59:475–494CrossRefGoogle Scholar
  17. Islam N (1995) Growth empirics: a panel data approach. Q J Econ 110:1127–1170CrossRefGoogle Scholar
  18. Lee K, Pesaran MH, Smith R (1997) Growth and convergence in a multi-country empirical stochastic Solow model. J Appl Econ 12:357–392CrossRefGoogle Scholar
  19. Meliciani V, Peracchi F (2004) Convergence in per-capita GDP across European regions: a reappraisal. CEIS Working Paper n. 204Google Scholar
  20. Neven D, Gouyette C (1995) Regional convergence in the European Community. J Common Mark Stud 33:47–65CrossRefGoogle Scholar
  21. Orcutt GH, Winokur HS (1969) First order autoregressions: inference, estimation and prediction. Econometrica 37:1–14CrossRefGoogle Scholar
  22. Paci R (1997) More similar and less equal: economic growth in the European regions. Weltwirtsch Arch 133:609–633CrossRefGoogle Scholar
  23. Park RE, Mitchell BM (1980) Estimating the autocorrelated error model with trended data. J Econom 13:185–201CrossRefGoogle Scholar
  24. Phillips PCB, Sul D (2003) Dynamic panel estimation and homogeneity testing under cross section dependence. Econ J 6:217–259Google Scholar
  25. Quah D (1996) Regional convergence clusters across Europe. Eur Econ Rev 40:286–952Google Scholar
  26. Quenouille MH (1956) Notes on bias in estimation. Biometrika 43:353–360Google Scholar
  27. Rodríguez-Pose A (1998) The dynamics of regional growth in Europe. Social and political factors. Clarendon Press, OxfordGoogle Scholar
  28. Sala-i-Martin X (1996) Regional cohesion: evidence and theories of regional growth and convergence. Eur Econ Rev 40:1325–1352CrossRefGoogle Scholar
  29. Solow R (1956) A contribution to the theory of economic growth. Q J Econ 70:65–94CrossRefGoogle Scholar

Copyright information

© Physica-Verlag Heidelberg 2009

Authors and Affiliations

  1. 1.University of TeramoTeramoItaly
  2. 2.Faculty of EconomicsTor Vergata UniversityRomeItaly

Personalised recommendations