Transition, Integration and Catching Up: Income Convergence between Central and Eastern Europe and the European Union

Countries in Central and Eastern Europe (CEE) still exhibit lower income levels than the European Union (EU) average. This paper examines convergence in per-capita GDP between CEE and the EU over the period 1990-2012 using parametric and nonparametric methods. The results indicate initial divergence from the EU benchmark but strong convergence over the 2000s, even in the face of the global financial crisis. However, the income distribution evolved from a unimodal to a multimodal one, revealing growing disparities within CEE. Human capital and economic reforms promoted convergence, while financial deepening and price instability had a negative effect.