Testing convergence of European regions: A semiparametric approach

We provide a reappraisal of income convergence across European regions over the last two decades by using a semiparametric partially linear model to approximate the relationship between the average growth rate of GDP per capita and the initial GDP per capita. Estimation results point out both country heterogeneity and non-linearity in the convergence process. The findings suggest that low income regions, in particular those from new adhesion countries, diverge while medium income regions converge and that there is no evidence of convergence for high income regions.

Research Highlights► Reappaisal of income convergence across European regions over the last two decades. ► Semiparametric modelling with regressor endogeneity. ► Country heterogeneity and non-linearity in the convergence process. ► Low income regions diverge; medium income regions converge; and little evidence of convergence for high income regions.