Convergence clubs and spatial structural change in the European Union

This article studies regional income convergence and its conditioning factors in the European Union during the 2003-2016 period. Building on previous research that documents the formation of multiple convergence clubs in per-capita income, we study the role of structural change and spatial dependence as key conditioning factors of the club convergence process. First, we document that convergence clubs shows a strong degree of spatial dependence. Second, we evaluate the role of spatial structural change in the formation of convergence clubs using a spatial ordered-logit model. We find that there are contrasting spatial spillovers between variables of structural change. On the one hand, the geographical spillover effects for manufacturing are positive and statistically significant. On the other hand, routine services and knowledge-intensive services show negative spatial spillover effects. We discuss our results considering the related literature in order to provide major insights on the complex economic geography of the European Union.