Income dynamics in an enlarged Europe: the role of capital regions

This article is intended to study, by means of both a nonparametric and a parametric approach to convergence, whether after the latest enlargements of the European Union the traditional twofold spatial regime of regional per capita income growth, predicting a north/south and/or a cohesion/non-cohesion countries divide, should be replaced by an alternative east/west spatial pattern. A second relevant issue is whether new member regions where capital cities are located are benefiting from the same “network effect” that enhanced growth in old member capital regions during the 1980s and early 1990s. We find evidence, by means of spatial econometrics tools, of significant spatial effects in the enlarged Europe which seems to be formed by a group of old member regions, slowly becoming more homogeneous, and a newcomers group which represents a separate “convergence club” but whose capital regions are rapidly integrating into the west. The European regional policy may play a crucial role in this context.