Working paper

Income convergence during the crisis: did EU funds provide a buffer?

This paper shows that economic convergence continued during the crisis for the EU as a whole, although at a slower pace, but for regions in the EU14,

Publishing date
18 October 2016
Authors
Silvia Merler

Economic convergence is at the heart of European Union integration. The importance of this objective has not diminished over time, and it is especially relevant in light of the economic crisis that has exacted a heavy toll on EU countries and created scepticism about the merits of EU policies.

The author looks at how economic convergence evolved in different regions during the crisis and assess the role played by those funds that are provided to the more disadvantaged regions, with the aim of facilitating their convergence to average EU income levels.

Both an absolute and a conditional convergence analysis were run, using regional data on per capita GDP in purchasing power standard. Convergence continued during the crisis for the EU as a whole, although at a slower pace, but for regions in the EU14, and especially in the euro area, convergence appears to have stopped during the crisis, or even switched to a divergence path.

The funds’ eligibility rules were exploited in order to construct a quasi-experimental framework, based on comparable treatment and control group of regions. Regional policy played an important role in limiting the effects of the crisis at the region level, by providing an important anchor for convergence in those regions that benefited from the funds.

About the authors

  • Silvia Merler

    Silvia Merler, an Italian citizen, is the Head of ESG and Policy Research at Algebris Investments.

    She joined Bruegel as Affiliate Fellow at Bruegel in August 2013. Her main research interests include international macro and financial economics, central banking and EU institutions and policy making.

    Before joining Bruegel, she worked as Economic Analyst in DG Economic and Financial Affairs of the European Commission (ECFIN). There she focused on macro-financial stability as well as financial assistance and stability mechanisms, in particular on the European Stability Mechanism (ESM), providing supportive analysis for the policy negotiations.

    Between May 2011 and August 2012, she worked as Research Assistant to Jean Pisani-Ferry, then-director of Bruegel. During 2009 and 2010, while a student, she collaborated to research projects of Bocconi University and the Italian ENI Enrico Mattei Foundation (FEEM). During this period she was involved in the MICRODYN project, working on a cross-country and cross-sectors analysis of productivity developments with firm level data, and on the POLINARES project (“Policy for Natural Resources”).

    Born in 1986, she holds a MSc in Economics and Social Sciences at Bocconi University in Milan and graduated in 2011 with a thesis on Current Account Imbalances within the Euro Area. She obtained a BA in Economics and Social Sciences from the same university in 2008, with a thesis on Ukraine and Moldova in the European Neighbourhood Policy.

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