This paper explores income convergence in European countries. Unlike previous
research, the analysis is based on the pair-wise approach (Pesaran, 2007),
identifying four cases: long-run convergence, catching-up, lagging-behind,
and divergence. The results suggest that catching-up prevails, while no
significant evidence was found for the existence of long-run convergence at
the whole sample level. Still, three convergence clubs appear that consist
of countries recording long-run convergence, two in transitional countries
and one involving advanced countries, which indicate the similar growth
model of the countries belonging to each club. Nevertheless, the results do
not allow us to claim with certainty that the income paths of the club
members will not exhibit systematic tendencies toward divergence or changes
in membership in future.
Paths of income convergence between country pairs within Europe