Promoting social cohesion and convergence
EU convergence: Geographical dimension, impact of COVID-19 and the role of policy
Published:
22 March 2023
Research report
Abstract
Historically, the political debate around EU convergence has gathered momentum in the aftermath of a crisis. In the wake of the COVID-19 pandemic, the purpose of this report is to take stock of the last two decades of convergence trends. The study begins with an empirical investigation of economic, social and institutional convergence over 2004–2019 at both Member State and regional levels. The analysis is then extended to 2020 and 2021 to examine the impact of the pandemic. The study confirms overall upward convergence, driven by the central and eastern European Member States, which the pandemic appears to have slowed but not stopped. The analysis of trends is followed by an assessment of the potential impact of the Recovery and Resilience Facility (RRF) on convergence and a discussion of different policy scenarios to support upward convergence, based on the current experience with the RRF and the ongoing debate about the future of EU cohesion policy.
Key findings
Despite the EU regaining positive momentum following the economic crisis of 2008–2013, EU convergence had not reached its pre-crisis pace by 2020, even though economic, social and institutional gaps among the EU Member States narrowed steadily until right before the outbreak of the COVID-19 pandemic.
At regional level, there was upward convergence in the EU between 2004 and 2019, although this took place at a slower pace than at country level. This trend was mainly driven by central and eastern European Member States experiencing fast growth of their capital regions. However, southern European regions suffered economic stagnation and a more general deterioration in social and institutional conditions, underscoring the need for upward convergence to remain at the core of EU policy action.
The COVID-19 crisis had a significant impact on EU convergence, and although it did not reverse the trend of strong upward convergence, it did accelerate patterns of divergence that were emerging, such as increasing differences in GDP per capita. This underlines that it will be critical for the EU to have policy tools that adapt to large economic shocks and to deep social changes linked to the EU’s green and digital transition.
The Recovery and Resilience Facility (RRF) is the EU’s unprecedented response to drive the transformation of Member States’ economies after the COVID-19 pandemic. An analysis of the RRF plans of four countries reveals that this key instrument is contributing to reforms and investments that would have otherwise remained an aspiration, and although convergence is not in itself an objective of the RRF, it is a potential by-product of Member States’ recovery plans.
The implementation of the RRF is emerging as an important basis for forward thinking on alternative ways to support upward convergence. The new findings explore various options for achieving this goal, such as further strengthening traditional cohesion policies, building a centralised reform–investment model or developing an integrated approach that combines stronger cohesion policies with a centralised reform–investment model. These will be key elements for EU policymakers to consider as part of the debate on supporting economic and social convergence.
The report contains the following lists of tables and figures.
List of tables
Table 1: Economic, social and institutional indicators used in the convergence analysis
Table 2: Unconditional beta-convergence in the EU, by indicator and time period, 2004–2019
Table 3: Conditional convergence in income inequality, 2004–2008, 2008–2013 and 2013–2019
Table 4: APE on probability of convergence in income inequality
Table 5: Conditional convergence in the AROPE rate, 2005–2008, 2008–2013 and 2013–2019
Table 6: APE on the probability of convergence in the AROPE rate
Table 7: WGI pairwise correlations
Table 8: Unconditional beta-convergence in the NUTS 2 regions, by indicator and period, 2004–2019
Table A1: Income inequality convergence (2004–2008, 2008–2013, 2013–2019)
Table A2: AROPE conditional convergence (2005–2008, 2008–2013, 2013–2019)
Table A3: Performance of four countries in relation to the European Pillar of Social Rights Social Scoreboard 2020
List of figures
Figure 1: Beta-convergence – GDP per capita (PPS), EU27, 2004–2019
Figure 2: Sigma-convergence – GDP per capita (PPS), in the EU27 and by geographical cluster, 2004–2019
Figure 3: Beta-convergence – adjusted household disposable income per capita (PPS), EU27, 2009–2019
Figure 4: Sigma-convergence – adjusted household disposable income per capita (PPS), in the EU27 and by geographical cluster, 2009–2019
Figure 5: Beta-convergence – income quintile share ratio, EU27, 2004–2019
Figure 6: Sigma-convergence – income quintile share ratio, in the EU27 and by geographical cluster, 2004–2019
Figure 7: Predicted probabilities of convergence in income inequality, by value added in the agricultural sector, in the EU27 and by geographical cluster
Figure 8: Beta-convergence – compensation of employees per hour worked, EU27, 2004–2019
Figure 9: Sigma-convergence – compensation of employees per hour worked, in the EU27 and by geographical cluster, 2004–2019
Figure 10: Beta-convergence – employment rate, EU27, 2004–2019
Figure 11: Sigma-convergence – employment rate, in the EU27 and by geographical cluster, 2004–2019
Figure 12: Beta-convergence – unemployment rate, EU27, 2004–2019
Figure 13: Sigma-convergence – unemployment rate, in the EU27 and by geographical cluster, 2004–2019
Figure 14: Beta-convergence – NEET rate, EU27, 2004–2019
Figure 15: Sigma-convergence – NEET rate, in the EU27 and by geographical cluster, 2004–2019
Figure 16: Beta-convergence – early school-leavers rate, EU27, 2004–2019
Figure 17: Sigma-convergence – early school-leavers rate, in the EU27 and by geographical cluster, 2004–2019
Figure 18: Beta-convergence – AROPE rate, EU27, 2005–2019
Figure 19: Sigma-convergence – AROPE rate, in the EU27 and by geographical cluster, 2005–2019
Figure 20: Predicted probabilities of convergence in the AROPE rate by income inequality levels, in EU27 and by geographical cluster
Figure 21: Beta-convergence – government effectiveness, EU27, 2004–2019
Figure 22: Sigma-convergence – government effectiveness, in the EU27 and by geographical cluster, 2004–2019
Figure 23: Sigma-convergence in quality of governance indicators, 2004–2019
Figure 24: Beta-convergence – GDP per capita, NUTS 2 regions, 2004–2019
Figure 25: GDP per capita in NUTS 2 regions – transition maps and matrix and distribution of classes, 2004–2008
Figure 26: GDP per capita in NUTS 2 regions – transition map and matrix and distribution of classes, 2008–2013
Figure 27: GDP per capita in NUTS 2 regions – transition map and matrix and distribution of classes, 2013–2019
Figure 28: GDP per capita growth (%) in CEE countries, by region, 2004–2019
Figure 29: Beta-convergence – employment rate, NUTS 2 regions, 2004–2019
Figure 30: Employment rate in NUTS 2 regions – transition map and matrix and distribution of classes, 2004–2008
Figure 31: Employment rate in NUTS 2 regions – transition map and matrix and distribution of classes, 2008–2013
Figure 32: Employment rate in NUTS 2 regions – transition map and matrix and distribution of classes, 2013–2019
Figure 33: Beta-convergence – EQI, NUTS 2 regions, 2010–2019
Figure 34: EQI in NUTS 2 regions – transition map and matrix and distribution of classes, 2010–2013
Figure 35: EQI in NUTS 2 regions – transition map and matrix and distribution of classes, 2013–2019
Figure 36: Beta-convergence – GDP per capita, EU27, 2013–2019 and 2013–2021
Figure 37: Sigma-convergence – GDP per capita (€), EU27, 2004–2021
Figure 38: Beta-convergence – employment rate, EU27, 2013–2019 and 2013–2021
Figure 39: Sigma-convergence – employment rate (%), EU27, 2004–2021
Figure 40: Beta-convergence – government effectiveness, EU27, 2013–2019 and 2013–2020
Figure 41: Sigma-convergence – government effectiveness, EU27, 2004–2020
Figure 42: Total number of social reforms in Croatia, Germany, Italy and Spain, by policy area
Figure 43: Breakdown of investment by policy areas in Croatia, Germany, Italy and Spain (% of total RRF funds)
- Number of pages
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104
- Reference nº
-
EF22016
- ISBN
-
978-92-897-2312-1
- Catalogue nº
-
TJ-07-23-025-EN-N
- DOI
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10.2806/706661
- Permalink
Cite this publication
Eurofound (2023), EU convergence: Geographical dimension, impact of COVID-19 and the role of policy, Publications Office of the European Union, Luxembourg.
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