Income convergence of the Western Balkan States and EU Member States in the contexts of European economic integration

Abstract

Income convergence has been the subject of many theoretical and empirical research for more than half a century. Many researchers devoted great attention analyzing income convergence among countries. However, there is still no clear answer, nor a unique result about this topic. Although foreign literature has vast number of papers that examine income convergence among the European Union countries, as well as the effect of various factors on income convergence, this field has not been sufficiently explored in domestic literature. In addition, there is still a small number of papers that test the existence and speed of income convergence between the developed countries of the European Union and the Western Balkan States. In this regard, the subject of the doctoral dissertation is income convergence of the Western Balkan States and European Union member states in the context of European economic integration. The aim of the research in the doctoral dissertation is to determine the existence of income convergence among the European Union countries. Also, the aim of the research is to determine the difference in the speed of income convergence between developed countries of the European Union, on the one hand, and New Member States and Western Balkan States, on the other. In addition, the aim of the research is to determine factors that affect income convergence. The results of the empirical analysis show the existence of income convergence among European Union countries. The results also show higher speed of income convergence of Western Balkan States and New Member States, compared to developed European Union members, depending on the observed subperiod. By analyzing the direction and intensity of various factors on income convergence, results indicate positive impact of bilateral trade, positive impact of foreign direct investment in the pre-crisis years, and positive effect of presence of economic freedom in the years after Global economic crisis. Reform processes haven’t shown a strong and continuous effect on income convergence of Central European transition countries.