Prof. Ermelinda MeksiUniversity of Tirana, Faculty of

Economics

Convergence NotionConvergence classical concept:

-The income level of poorer countries of the world should converge to those of richer ones

Convergence Debate-There are debates on the convergence, interpretations, implications, and absorptive capacities within the neoclassical growth theories and new growth theories- -What conditions and policies the developing economies have to apply in order to reduce the gap with the developed world ,“the Word is not flat”?

SCOPE OF PRESENTATION To estimate the speed of convergence of Balkan region

(β convergence parameter) with EU To estimate if the disparities in the income per capita in

the Balkan and with EU have diminished or not (σ-convergence ) To look into the structural change and agriculture sector

convergence

The way forward for policy makers

Hypothesis raised by the paper

The Western Balkan Countries are diminishing the Income Gap with EU;

Structural Changes are converging with Western Balkans;

Public Policies are supporting the fast catch up process.

Beta convergence in Balkan Countries

Beta = 0,053 Beta = 0,055

Calculations of the authors. Source of data, World Bank database

Sigma convergenceThe estimation of convergence in Balkan countries in

terms of income per capita with each other, through the trend line slope of the regression of standard deviation of GDP per capita per each year of the period 1995-2012

Change in the ratio of GDP per capita of Balkan Countries towards EU GDP per capita

0,00

0,10

0,20

0,30

0,40

0,50

0,60

0,70

ALB BIH MKD MNE SRB BGR HRV ROM

1995

2013

EU Countries

Calculation of the author, Source of data from the World Bank Database

Convergence gap of western Balkan countries to Croatia, when accessed EU in 2013

Country

GDP per capita 2013, PPP (current international $)

Option I(Beta as average growth of converg)

No of Years

Option II (expected annual growth for 2015-2019 according to IMF

No of years

Montenegro 14.132 5,3% 8 3,3% 13

Serbia 13.020 5,3% 9,6 2% 13

Macedonia 11.612 5,3% 11,8 3,9% 16

Albania 10.374 5,3% 14 4,2% 17

Bosnia and Herzegovina 9.536 5,3% 15,6 3,8%

21

Calculation of the author, source of data, World Bank and IMF World Economic Outlook, October 2014.

Convergence gap of Western Balkan Countries to EU

Country

GDP per capita in 2013 in

PPP(current international $)

Expected annual growth 2015-

2019 % No of years

Montenegro 14.132 3,3 68

Serbia 13.020 3,8 55

Macedonia 11.612 3,9 58

Albania 10.374 4,2 55

Bosnia and Herzegovina 9.536 3,8 72

EU 35.501 1,9Calculation of the author, source of data, IMF World Economic Outlook, October 2014 and World Bank Data. For Serbia is calculated as expected growth the average growth for the period 2000-2010 as the best years of positive growth considering that for most of the other years the data were fluctuating on

negative values making difficult the application of the same model as in other countries.

Agriculture Added Value in GDP over the years for Balkan Countries and EU

Source: World Bank Database

Agriculture is the main sector affected by development according to growth theories :

By reducing the contribution to GDP and experiencing the improvment of productivity due to the use of technology

Convergence in this sector would be assessed in terms of productivity convergence with developed countries.

Convergence of Productivity in Agriculture with EU (through the dispersion of Agriculture value added per worker of EU with each

Balkan country)

Calculation of the author. Source of data: World Bank Database

FindingsBalkan countries: Higher growth rates but slower

convergence rate than EU Countries.

The new members of EU: Higher speed of convergence than Balkan countries, example:Romania and Bulgaria at the pre-accession moment and after the accession to EU.

The global crisis impact is continuing to be felt in Balkan countries with lower rates of growth after 2009, increasing the gap with EU.

It is necessary, the establishment of strong and reliable institutions, political stability, promotion of business climate, to guide the further economic convergence and welfare

- European integration- best practices- the speed of the convergence in agriculture- The case of Slovenia, Bulgaria, Croatia

Albania, Serbia and Montenegro have productivity in this sector too far from EU countries,therefore will need more time and work to achieve the EU average growth

Balkan countries should implement "benchmarking“ the best practices- to speed up the convergence

Conclusions

REFLECTIONS

  Considering the situation in Greece The huge pre-gap in particular in agriculture sector existing

among Balkan and EU countries

“The world is not flat" therefore convergence is a dynamic process that requires a proactive role of the public policies.

Should we re-estimate new tools and approaches to address: potentials of development, accumulation of resources, productivity in particular on human capital,principal players -institution and political factors as well as tools of collaboration among the concerned countries that may contribute to the convergence?

Could the distribution of IPA funds for Balkan candidate and potential countries folloing the principle of merits and not according to the needs of these countries, weaken the contries lacking qualified human resources in the region?