The European regional growth process revisited

Abstract

With the 2004 enlargement to the East, the EU regional growth process can no longer be seen in the frame of the traditional core-periphery pattern. This is why this article proposes an innovative methodology to endogenously detect convergence clubs while accounting for spatial autocorrelation across regions. Our model is estimated on 244 EU25 regions over 1991-2003. Our results indicate that four distinctive clubs are present in our sample. In addition, the model we use does not rely on the traditional neoclassical model but on Verdoorn's law, which allows us to account for the presence of increasing returns to scale. Our conclusions give new insights for policy makers interested in convergence and regional policies developed to promote it.