Convergence and divergence tendencies in the European Union: New evidence on the productivity/institutional puzzle

Bo o ić, Zo an; Radicic, D agana; Ri an, Vladana; Tomaš, Dalibo
A icle
Con e gence and di e gence endencies in he Eu opean
Union: New e idence on he p oduc i i y/ins i u ional
puzzle
Economies
P o ided in Coope a ion wi h:
MDPI – Mul idisciplina y Digi al Publishing Ins i u e, Basel
Sugges ed Ci a ion: Bo o ić, Zo an; Radicic, D agana; Ri an, Vladana; Tomaš, Dalibo (2024) :
Con e gence and di e gence endencies in he Eu opean Union: New e idence on he p oduc i i y/
ins i u ional puzzle, Economies, ISSN 2227-7099, MDPI, Basel, Vol. 12, Iss. 12, pp. 1-35,
h ps://doi.o g/10.3390/economies12120323
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Ci a ion: Bo o i´c, Zo an, D agana
Radicic, Vladana Ri an, and Dalibo
Tomaš. 2024. Con e gence and
Di e gence Tendencies in he
Eu opean Union: New E idence on
he P oduc i i y/Ins i u ional Puzzle.
Economies 12: 323. h ps://doi.o g/
10.3390/economies12120323
Academic Edi o : Fabio Masini
Recei ed: 1 No embe 2024
Re ised: 15 No embe 2024
Accep ed: 18 No embe 2024
Published: 27 No embe 2024
Copy igh : © 2024 by he au ho s.
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A icle
Con e gence and Di e gence Tendencies in he Eu opean Union:
New E idence on he P oduc i i y/Ins i u ional Puzzle
Zo an Bo o i´c 1, D agana Radicic 2,* , Vladana Ri an 1and Dalibo Tomaš 1
1Facul y o Economics, Uni e si y o Banja Luka, 78000 Banja Luka, Bosnia and He zego ina;
[email p o ec ed]g (Z.B.); [email p o ec ed]g (V.R.); dalibo [email p o ec ed] (D.T.)
2
Lincoln In e na ional Business School, College o A s, Social Sciences and Humani ies, Uni e si y o Lincoln,
Lincoln LN6 7TS, UK
*Co espondence: [email p o ec ed]
Abs ac : The Wo ld Bank (WB) has desc ibed he Eu opean Union (EU) as a con e gence machine,
and he eal and ins i u ional con e gence has been achie ed o a long pe iod o ime, and EU’s
cohesion policy, alongside he Reco e y and Resilience Facili y (RRF), emains c ucial o d i ing
e o ms and os e ing in es men s ha p omo e g ow h. Bu , in he las wo decades his con e gence
machine has s opped wo king, and he con e gence p ocess has u ned in he di e gence. The di e -
gence p ocess poses a g ea isk o he smoo h unc ioning o he EU, and i inc eases ulne abili y o
he EU o nega i e economic shocks. P oduc i i y and ins i u ional con e gence a e a necessa y p e-
condi ion o he smoo h unc ioning o he EU, educing di e ences in s anda ds o li ing, inc easing
esilience, and achie ing en i onmen al sus ainabili y. In he p esen pape , we will apply log - es
o e he pe iod 2003–2023 o in es iga e he o ma ion o p oduc i i y and ins i u ional con e gence
clus e s. Ou goal is o iden i y which coun ies belong o he poo p oduc i i y/ins i u ional clubs,
and o p o ide he necessa y policy implica ions. Resul s indica e he exis ence o mul iple s eady
s a es, which means ha EU is ulne able o ex e nal economic shocks
Keywo ds: con e gence; p oduc i i y; ins i u ions; con e gence clubs
JEL Classi ica ion: D24; O11; O43; O47; O52; F63; F68
1. In oduc ion
The Eu opean Union (EU) in eg a ion p ocess is a la ge, ex emely complex p ocess,
he g ea es endea o in he globaliza ion e a o economic and poli ical uni ica ion. Bu
he mo e complex he p ojec is, he g ea e is isk ha i will ail. The EU s a ed as a
small, success ul, and manageable p ojec , bu cons an enla gemen has made i e y
di icul o achie e ins i u ional, p oduc i i y, and income con e gence, which is s essed
as a necessa y p econdi ion o u he EU in eg a ion. Ins i u ional con e gence, which
e e s o he con e gence o economic ules and policies, should ha e been os e ed by he
EU enla gemen p ocess.
In he a e ma h o he inancial c isis, he EU has been a ec ed by se e al co -
ela ed shocks, which ha e led o banking and deb c ises in some o EU coun ies
(
Pé ez-Mo eno e al. 2020
). The EU has been desc ibed as a “con e gence machine” by
he Wo ld Bank (WB) (Inde mi and Raise 2012), bu since he 2008 inancial c isis, he
“con e gence machine” has s opped wo king, which led o a no h-sou h di ide in he EU
(Landesmann 2015). The gap is inc easing be ween he mo e p oduc i e No h and he ine
Sou h (Gopina h e al. 2017). The no h-sou h di ide does no e e only o p oduc i i y and
income, i also e e s o he ins i u ional di ide. In con as , No h and Wes e n Eu opean
coun ies a e membe s o high-quali y ins i u ional clubs, and Sou h-Eas e n Eu opean
coun ies a e membe s o low-le el ins i u ional clubs (Glawe and Wagne 2021a). The Cen-
al and Eas e n Eu opean coun ies seem caugh in he middle-income ap (
S aeh 2015
)
Economies 2024,12, 323. h ps://doi.o g/10.3390/economies12120323 h ps://www.mdpi.com/jou nal/economies
Economies 2024,12, 323 2 o 35
and he poo ins i u ional ap (Glawe and Wagne 2021a). The EU has expe ienced a
p oduc i i y slowdown since he la e 1990s, mainly because o he decline in To al Fac o
P oduc i i y (TFP) and capi al deepening (Esc ibá-Pé ez and Mu gui Ga cía 2019). No
only ha he p oduc i i y in he EU slowed down, bu he in e na ional posi ion o he
EU has been un a o able since he Uni ed S a es (US) has expe ienced high g ow h a es
since he la e 1990s. Ins i u ional quali y is cen al o he p oduc i i y challenge in he EU
(Rod íguez-Pose and Ganau 2022).
In ecen yea s, he COVID pandemic and wa in Uk aine ha e comple ely changed
he global en i onmen . These challenges place signi ican p essu e on coun ies, necessi-
a ing con inuous echnological ad ancemen ha in ol es edesigning p oduc ion models
o be mo e e icien , compe i i e, and en i onmen ally sus ainable. The global lockdown
du ing he COVID pandemic led o a his o ic peak in CO
2
emissions (IEA 2022), causing
eco d le els o ca bon dioxide, me hane, and ni ous oxide in he a mosphe e in 2021
(
Wo ld Me eo ological O ganiza ion (WMO) 2019
). Technological p og ess, based on inno-
a ions will lead o a ca bon- ee u u e, by cu ing CO
2
emissions (Cas ejon-Campos e al.
2022). Technological p og ess will enable a mo e e ec i e g een ene gy ansi ion. Sus ain-
able de elopmen ac oss all egions is c ucial o economic p ospe i y, social well-being,
and he EU’s o e all compe i i eness. O e ecen decades, EU policies, especially cohesion
policy, ha e g ea ly helped o educe he de elopmen gaps be ween di e en egions.
Achie ing sus ainable de elopmen ac oss all egions is c ucial o economic p os-
pe i y, social well-being, and he EU’s compe i i eness. O e ecen decades, EU policies,
especially cohesion policy, ha e g ea ly helped o educe he de elopmen gaps be ween
di e en egions. The EU’s cohesion policy, alongside he Reco e y and Resilience Facili y
(RRF), emains c ucial o d i ing e o ms and os e ing in es men s ha p omo e g ow h.
The g ow h ha lacks cohesion will in ensi y concen a ion ends, leading o g ea e e -
i o ial and social di isions. Those who a e ma ginalized may cul i a e esen men and
discon en owa d he democ a ic sys em and he ounda ional alues o he EU, which
will inc ease he ulne abili y o he EU, and dec ease i s esilience. Lack o cohesion
will signi ican ly dec ease he p obabili y o achie ing en i onmen al sus ainabili y and
inc ease he p obabili y o alling apa o he EU.
The impo ance o ins i u ions o he p oduc i i y and long- e m economic g ow h
has been s essed ou in bo h heo e ical and empi ical li e a u e, s a ing ha he ins i-
u ional quali y is equally impo an , o ou weighs adi ional ac o s, including ech-
nology, in explaining he di e ences in income pe capi a among coun ies (No h 1981;
Knack and Kee e 1995
;Hall and Jones 1999;Acemoglu e al. 2001,2005;Acemoglu and
Robinson 2012;Rod ik e al. 2004). The absence o ins i u ional con e gence in sho e m,
i.e., he ins i u ional di e gence among EU coun ies, will likely make coun ies wi h he
low le el o ins i u ional quali y mo e exposed o he shocks, which will make en i e EU ul-
ne able o he shocks (Pé ez-Mo eno e al. 2020). In he long e m, ins i u ional di e gence
will lead o di e gence in p oduc i i y, pe capi a income, and in o e all s anda d o li ing,
which will subs an ially inc ease isk o alling apa o he EU (Pé ez-Mo eno e al. 2020).
The ins i u ional di e gence wi hin he EU would esul only in condi ional con e gence, a
bes , which will esul in high dispe sion be ween he na ional le els o income pe capi a,
in he long un (Blackbu n e al. 2006). The end o ins i u ional di e gence has been
s essed by many esea che s, especially ecen ly, as a cons an ea u e o he EU, ins ead o
an ins i u ional con e gence p ocess. As al eady men ioned, ins i u ional di e gence ends
ha e been he main cha ac e is ics o he EU, a he han he ins i u ional app ochemen ,
which has been e i ied by applying he sigma, o be a con e gence es s. This kind o
analysis neglec s he possibili y o exis ing mul iple s eady s a es.
This pape ocuses on iden i ying mul iple s eady s a es, i.e., con e gence clubs. This
s udy o e s se e al con ibu ions o he li e a u e on he mul iple s eady s a es ega d-
ing p oduc i i y and ins i u ional quali y wi hin he EU. The p esen s udy is among
he i s o s udy mul iple p oduc i i y and ins i u ional clubs wi hin he EU, by using
Phillips and Sul’s
(2007,2009) me hodology. Ou goal is h ee old. Ou i s goal is o p o-
Economies 2024,12, 323 3 o 35
ide e idence which will enable us o de e mine whe he he EU is ulne able o ex e nal
economic shocks. The exis ence o he mul iple p oduc i i y and ins i u ional con e gence
clubs is conside ed as e idence o ulne abili y o ex e nal economic shocks, which could,
in long e m, cause he alling apa o he EU. Ou second goal is o iden i y which coun-
ies a e membe s o he high p oduc i i y/ins i u ional quali y con e gence clubs, and
which coun ies a e unde pe o ming, and whe he p oduc i i y and ins i u ional clubs a e
o med mainly based on geog aphic egion. And ou hi d goal is o iden i y he ac o s
ha explain he o ma ion o p oduc i i y con e gence clubs ac oss he EU. Answe ing
hese h ee ques ions is impo an o policymake s, enabling hem o iden i y speci ic
policies o pa icula coun ies o achie e en i onmen ally and economically sus ainable
de elopmen , which will dec ease he Union’s ulne abili y o ex e nal economic shocks,
and i s dependance on pollu ing ene gy sou ces.
This pape is o ganized as ollows. Sec ion 2discusses he exis ing li e a u e and gi es
some heo e ical backg ound. Sec ion 3p o ides in o ma ion on he model speci ica ion,
applied me hodology and he da a. Sec ion 4con ains he empi ical esul s and discussion.
Sec ion 5is he conclusion o he pape .
2. Theo e ical Backg ound
The p esen s udy is ocused on ins i u ional quali y and i s impac on p oduc i i y
g ow h. The me hodology ocused on iden i ying he mul iple s eady s a es is ela i ely
new wi hin economic heo y, which is why he economic li e a u e is de icien wi h esea ch
ocused on p oduc i i y and ins i u ional con e gence clubs. Especially li e a u e ocused
on he TFP con e gence clubs. In his sec ion we will s a wi h he b ie ly p esen a ion
o he indings o he gene al li e a u e on impo ance o he ins i u ional quali y o he
p oduc i i y g ow h, hen we will ocus on he esea ch on he p oduc i i y and ins i u ional
con e gence wi hin he EU.
The cha ac e is ic o he EU is ins i u ional di e gence du ing and a e he inancial
c isis. Rega ding p oduc i i y, since he mid-1990s, p oduc i i y g ow h in he Eu ozone
has consis en ly lagged behind ha obse ed in o he ad anced economies. Since 2004, he
Membe S a es in Cen al and Eas e n Eu ope ha e con inued o expe ience ela i ely s ong
p oduc i i y g ow h. In con as , in he o me EU-15 coun ies, p oduc i i y has emained
almos s agnan , ba ely abo e ze o. None heless, he e is p oduc i i y con e gence be ween
he o me socialis ic coun ies ha joined he EU in 2004, on he one hand, and he co e
EU coun ies, on he o he hand.
The e is wide consensus in economic li e a u e ha ins i u ional quali y is a necessa y
p econdi ion o economic and p oduc i i y g ow h. Ins i u ional quali y, measu ed by he
EFI is s essed as an impo an ac o which accele a es he economic g ow h, o he small,
ansi ioned coun y (such as Bosnia and He zego ina), and o he EU membe s (C oa ia)
(Bo o i´c 2014a,2014b).
On he one hand, he high-quali y ins i u ions a e a necessa y p econdi ion o in-
c easing coun ies p oduc i i y and e iciency, and on he o he hand, coun y’s abili y o
adop supe io echnology de eloped elsewhe e also depends on he quali y o ins i u ions
(
Acemoglu e al. 2005
;Giuseppe and Sca pe a 2003;Ha ik e al. 2008;
Mc Mo ow e al. 2010
).
The p oduc i i y in he EU is a ec ed by he quali y o ins i u ions di ec ly, and indi-
ec ly, h ough inc eased sho and long- e m e u ns o human capi al and inno a ions
(Rod íguez-Pose and Ganau 2022). To inc ease p oduc i i y, local and na ional go e n-
men s wi hin he EU should make an addi ional e o o inc ease ins i u ional quali y, wi h
a ocus on co up ion (Ganau and Rod íguez-Pose 2019;Rod íguez-Pose and Ganau 2022;
Ége 2017). Fo he o me socialis ic coun ies ha joined he EU in 2004, ins i u ional
quali y is i al o long- e m p oduc i i y g ow h (Bo o i´c e al. 2020). Fo he i e Eu opean
coun ies (F ance, Ge many, I aly, Spain, and he Uni ed Kingdom) and he US, long- e m
p oduc i i y g ow h depends on high-quali y ins i u ions, especially on ma ke e iciency
(Calcagnini e al. 2021).
Economies 2024,12, 323 4 o 35
Ins i u ional quali y is s essed as an impo an ac o in speeding up p oduc i i y
g ow h, as well as boos ing p oduc i i y con e gence be ween he o me socialis ic coun-
ies ha joined he EU in 2004, on he one hand, and he co e EU coun ies on he o he
hand (Bo o i´c and Radicic 2023). Fo he OECD, p i a e go e nance, ma ke libe aliza ion,
and compe i ion a e i al o inc easing p oduc i i y g ow h, and o c ea ing p oduc i i y
con e gence (Giuseppe and Sca pe a 2003). The impac o he egula ions on he p oduc-
i i y g ow h o he EU, and on hei abso p i e capaci y is sec o -speci ic, acco ding o
Mc Mo ow e al.
(2010). In he case o manu ac u ing, he ma ke egula ions a e boos -
ing p oduc i i y g ow h, while i is he opposi e o he ma ke se ices. P oduc i i y
con e gence be ween he EU and he US, wi h an emphasis on ins i u ional quali y, has
been con i med by Mc Mo ow e al. (2010), and Inklaa e al. (2008). P oduc i i y con e -
gence wi hin he EU has been con i med by Radicic e al. (2023), Bou nakis (2012), and
Männasoo e al. (2018).
A s udy conduc ed by Beyae e al. (2019) ocused on s ochas ic ins i u ional con-
e gence o he Eu ozone o he pe iod om 2008 o 2018. Thei esul s sugges ha
wi hin he Eu ozone ins i u ions do no con e ge. The same conclusion goes o he smalle
sub-g oups. Simila esul s we e ob ained by Pé ez-Mo eno e al. (2020). They we e
in es iga ing ins i u ional con e gence wi hin he eu o a ea o he sub-pe iods du ing
and a e he inancial c isis. Thei indings show ha he ins i u ions di e ge wi hin he
eu o a ea. Mo e speci ically, du ing he inancial c isis he e was a sigma-di e gence, wi h
nonsigni ican sigma di e gence o he pe iod a e he c isis. They conclude ha he e
is an inc easing ins i u ional gap be ween he co e Eu opean coun ies and he Eu opean
pe iphe y. In con as o p e ious esea ch, Schön elde and Wagne (2019) ha e con i med
he ins i u ional
β
con e gence wi hin he EU and he p e endan coun ies. The con e -
gence is mainly he esul o he p e endan coun ies. Con e gence e e s o he a ea o
p oduc ma ke and business egula ion, while he e is
β
di e gence in he a ea o ule o
law wi hin he i s wel e eu o-a ea membe s (Schön elde and Wagne 2019). Rega ding
he
σ
con e gence, he au ho s s essed ha he c oss-coun y a iance in all aspec s o
ins i u ional de elopmen is educed only i he EU aspi an s a e included.
The p e ious s udies we e ocused on he
β
and
σ
con e gence, neglec ing he possi-
bili y o exis ing mul iple s eady s a es. The s udy conduc ed by Glawe and Wagne (2021a)
applied he Phillips and Sul’s (2007) log - es o e he pe iod 2002 o 2018. Thei esul s
con i m he exis ence o mul iple ins i u ional clubs which a e o med mainly based on
he geog aphic egion. The same conclusion goes o he income pe capi a clubs. The
li e a u e ega ding p oduc i i y clubs is a he sca ce. Kijek e al. (2023) iden i ied he h ee
p oduc i i y clubs, ac oss Eu opean egions, wi h he egional inno a ion sys ems as an
explana ion o he mul iple s eady s a es. Mendez (2020) has iden i ied h ee p oduc i i y
clubs wi hin he de eloped coun ies, and i e con e gence clubs wi hin he de eloping
coun ies, wi h a huge gap be ween he bo om clubs and mean, wi h a con inuous di e -
gence end. S udy ca ied by Basel e al. (2020) was ocused on he mul idimensional
index o de elopmen o he 1996–2015 pe iod. The s udy sample co e s 102 coun ies,
wi h esul s indica ing he exis ence o ou clubs. S udy conduc ed by Ha b e al. (2024)
ocuses on he TFP con e gence clubs co e ing 155 NUTS egions. Thei esul s indica e
ha he high p oduc i i y club consis s mos ly o “old” EU membe s, while some sou h
egions a e a high isk o alling in he “p oduc i i y ap”. The EU was cha ac e ized by
wo dis inc con e gence clubs, ega ding he GDP pe -capi a, o he pe iod 1980–2004
(
Ape gis e al. 2010
). The au ho s ha e s essed ou ha o hese wo con e gence clubs,
he p oxima e de e minan s o GDP pe -capi a a e highly he e ogeneous. Fo he 17 coun-
ies o La in Ame ica, o he 1990–2014 pe iod, ou con e gence clubs we e iden i ied,
ega ding GDP pe -capi a (Ba ios e al. 2019).

Economies 2024,12, 323 5 o 35
3. Me hodology and Da a
3.1. P oduc i i y and Ins i u ions
To measu e p oduc i i y, we will use he TFP which is desc ibed as he po ion o
ou pu ha is no explained by he numbe o inpu s used in p oduc ion (Comin 2010).
The no ion ha g ow h is d i en by ac o accumula ion combined wi h “some hing else”,
b oadly e e ed o as echnical p og ess o he “Solow” esidual, con inues o domina e
he hinking wi hin he p o ession. The TFP di e ence be ween he poo and ich coun ies
is s a ed as a main eason behind he di e ence in income pe capi a (
Hall and Jones 1999
;
Klenow and Rod íguez-Cla e 1997;Galla do-Alba án and Inklaa 2021). Solow (1957),
along wi h au ho s like G iliches (1987,1994,1996) and Nelson (1973,1981), acknowledged
ha TFP is a p oblema ic concep and ha i s calcula ion in ol es ce ain challenges. Nowa-
days, he e seems o be widesp ead ag eemen ha bo h he concep and measu emen o
TFP pose signi ican issues (Felipe and McCombie 2020;Sickles and Zelenyuk 2019). The
in e p e a ion o he TFP as a measu e o e iciency g ow h o he a e o echnical p og ess
(o cos educ ion) is p oblema ic. A mos , TFP se es as a measu e o dis ibu ional
changes (Felipe and McCombie 2020). To calcula e he TFP, we ollow Hall and Jones (1999),
and acco ding o Felipe and McCombie (2020), he calcula ed TFP is measu ed dolla s
pe wo ke , which means ha TFP g ow h is g ow h o he dolla wage. Acco dingly, he
ela i e TFP le els o he wo coun ies will also be he a io o wo alues measu ed in
dolla s pe wo ke . As men ioned, we ollow p ocedu e, p oposed by Hall and Jones (1999)
which is based on he s anda d Cobb-Douglas p oduc ion unc ion:
Y=Kα(AH)β, (1)
This is s anda d no a ion, Ys ands o G oss Value Added (GVA), ks ands o coun ies
capi al olume, H s ands o he human capi al, and
α
and
β
ep esen he ma ginal
p oduc s o he capi al and labo , espec i ely, whe e
α
+
β
= 1. The da a on he H a e
based on he es ima ions o he e u n o educa ion in he Mince ian wage eg ession
(
Mince 1974
), and on he a e age yea s o schooling. The ma ginal p oduc o he capi al,
α, is calcula ed based on he ma ginal p oduc o he labo , which is based on he sha e o
he compensa ion o employees in he GVA, as done in Radicic e al. (2023). Equa ion (1)
can be ea anged in pe capi a e ms as:
y=(k)α
1−αhA , (2)
This is s anda d no a ion o he Cobb-Douglas p oduc ion unc ion in pe capi a e ms,
whe e y s ands o he GVA pe employee, k s ands o he capi al ou pu a io (K/Y), and h
s ands o he human capi al pe employee. The TFP is calcula ed based on he Equa ion (2):
TFP =y
kα
1−αh, (3)
We ob ain capi al olume by applying he pe pe ual in en o y me hod (PIM):
K =I −1+(1−δ)K( −1)(4)
whe e Is ands o in es men s, and
δ
s ands o dep ecia ion. Fo he pu pose o his
esea ch, we will se he dep ecia ion a 0.06 as done in McQuinn and Whelan (2007),
Bu da and Se e gnini
(2008), McGuinness (2007), Bo o i´c and Radicic (2023), and Radicic
e al. (2023). The ini ial capi al is calcula ed o he yea 2002, which is he i s yea o ou
analysis, and we ha e applied he US Bu eau o Economic Ac i i y (BEA) p ocedu e, as
done in Bu da and Se e gnini (2008), Bo o i´c and Radicic (2023), and Radicic e al. (2023):
K0=I01+δ
g+δ(5)
Economies 2024,12, 323 6 o 35
whe e K
0
s ands o he ancho capi al, I
0
s ands o he in es men s in he ini ial yea , and
g s ands o a en-yea annual a e age ou pu g ow h a e (Be nanke and Ga kaynak 2001).
The linea dep ecia ion me hod will enable he ini ial capi al o be ully dep ecia ed in
1/δyea s:
K =(1− δ)K0+
−1
∑
i=0
(1− δ)I −i(6)
In his way he cu en capi al s ock is he weigh ed sum o ini ial capi al alue, K
0
, and
in e ening in es men expendi u es, wi h weigh s co esponding o hei undep ecia ed
componen s (Bu da and Se e gnini 2008). When calcula ing he capi al olume, he capi al
in use is wha belongs in he p oduc ion unc ion, no capi al in place (Solow 1957). The
da a on capi al u iliza ion a e a ailable only o he manu ac u e. In his pape , we ollow
Solow (1957), and we ha e co ec ed he numbe s om Equa ion (6) by he ac ion o he
labo o ce unemployed in each yea . The main assump ion is ha he labo and capi al
always su e unemploymen o he same pe cen age, which Solow admi s being w ong.
Bu in he case whe e he e is no ac ual da a, his assump ion is close o he u h, han
aking no ac ion a all (Solow 1957).
The WGI-s a e used ex ensi ely in economic li e a u e as a measu e o ins i u ional
quali y (Pie ucha and ˙
Zelazny 2020;Glawe and Wagne 2021a,2021b;Badalyan e al. 2016;
Schön elde and Wagne 2019;Bo o i´c and Radicic 2023). To measu e he quali y o he
ins i u ions we will use he WGI (Kau mann e al. 2010):
1. WGI1—Voice and Accoun abili y;
2. WGI2—Poli ical S abili y and Absence o Violence/Te o ;
3. WGI3—Go e nmen E ec i eness;
4. WGI4—Regula o y Quali y;
5. WGI5—Rule o Law;
6. WGI6—Con ol o Co up ion;
The WGI a e designed in s anda d no mal dis ibu ion, wi h mean ze o, s anda d
de ia ion o one, and unning om app oxima ely
−
2.5 o 2.5, wi h highe alues co e-
sponding o be e go e nance (Kau mann e al. 2010). Fo he pu pose o his esea ch,
we will use he WGI3, WGI4, WGI5, and WGI6. The WGI3, go e nmen e ec i eness,
e e s o he quali y o he public and ci il se ices, and hei independence om poli i-
cal p essu e, he quali y o policy o mula ion and implemen a ion and he c edibili y o
he go e nmen ’s commi men o such policies (Kau mann e al. 2010, p. 4). The WGI4,
egula o y quali y e e s o he o he abili y o he go e nmen o o mula e and imple-
men sound policies and egula ions ha pe mi and p omo e p i a e sec o de elopmen
(
Kau mann e al. 2010, p. 4
). The WGI5, ule o law, e e s o he ex en o which agen s
ha e con idence in and abide by he ules o socie y, and in pa icula he quali y o con ac
en o cemen , p ope y igh s, he police, and he cou s, as well as he likelihood o c ime
and iolence (Kau mann e al. 2010, p. 4). And WGI6, con ol o co up ion, e e s o he
pe cep ion o he ex en o which public powe is exe cised o p i a e gain, including
bo h pe y and g and o ms o co up ion, as well as “cap u e” o he s a e by eli es and
p i a e in e es s.
3.2. Econome ic Speci ica ions
As men ioned in he in oduc ion, we will apply he log - es o he decomposi ion
o a panel o ins i u ions/p oduc i i y (y
i
) de eloped by Phillips and Sul (2007,2009)
o iden i y mul iple s eady s a es. The me hodology p oposed by Phillips and Sul (2007,
2009) indeed in oduces an inno a i e app oach o iden i ying subg oups o “con e gence
clubs” wi hin a la ge da ase . Thei app oach add esses si ua ions whe e he en i e se
o economies o uni s may no be con e ging owa d a common s eady s a e, bu whe e
subse s o uni s (clubs) a e con e ging wi hin hemsel es. Tho logic behind he log es is
o ake ela i e ansi ion pa hs o each uni (e.g., coun y), which ep esen s an indi idual
Economies 2024,12, 323 7 o 35
ajec o y o each uni (e.g., coun y) ela i e o he c oss-sec ional a e age, and hen
eg ess he loga i hm o he a iance o hese pa hs o e ime.
The log - es assumes ha economies con e ge a simila a es. Howe e , when
he e is signi ican he e ogenei y in he g ow h pa e ns o he coun ies, he es esul s
may become less eliable. I economies wi hin a g oup a e he e ogenous ega ding hei
ini ial le el o de elopmen , o hey ollow subs an ially di e en g ow h pa hs, he es ’s
sensi i i y could esul in inco ec ly ejec ing con e gence o misclassi ying con e gence
clubs. This occu s because he model may no accu a ely e lec di e se g ow h beha io s,
leading o aul y conclusions abou whe he he economies a e con e ging o di e ging.
Fo he s a ing poin o his p ocedu e, Phillips and Sul (2007,2009) p oposed he
ollowing nonlinea dynamic ac o model:
logyi =gi +xi (7)
whe e g
i
s ands o he sys ema ic componen s and x
i
comp ises he idiosync a ic ime
pa h. We can ea ange he Equa ion (7) as:
logyi =gi +xi
µ µ =δi µ (8)
whe e
δi
s ands o he ime- a ying idiosync a ic componen and
µ
ep esen s a common
end componen . On he one hand, he economic in e p e a ion o he
δi
is ha i desc ibes
he ansi ion pa h o each economy, while
µ
desc ibes he equilib ium g ow h pa h ha is
common o all economies (Mendez 2020). On he o he hand, s a is ically idiosync a ic com-
ponen ,
δi
measu es how a is indi idual economy (logy
i
) om he common end (
µi
).
Acco ding o Phillips and Sul (2007,2009), he dynamics o he idiosync a ic componen
(δi )can be desc ibed in he ollowing way:
δi =δi+σiξi
log( ) α(9)
whe e
δi
a ies only ac oss economies, and
ξi
is iid(0,1) ac oss economies, ha is weakly
dependen o e ime. The he e ogenei y pa ame e is desc ibed wi h he
σi
, o
σi
> 0. To
achie e con e gence, all economies should shi o he same ansi ion pa h:
lim
→∞δi =δ∧α≥0 (10)
Phillips and Sul (2007,2009) ha e de ined a ela i e ansi ion pa ame e , h
i
, in o de o
es he con e gence hypo hesis om Equa ion (10):
hi =logyi
1
N∑N
h=1logyi
=δi
1
N∑N
i=1δi
(11)
This ansi ion pa ame e emo es common end componen (
µ
) om he Equa ion (8),
by di iding he obse ed a iable by i s c oss-sec ional mean in each yea (Mendez 2020).
The con e gence hypo hesis om he Equa ion (10) can be ea anged as:
H =1
N∑N
i=1(hi −1)2→0 (12)
This is alid only in he long un, when
→∞
. F om he Equa ion (12), he con e gence
is achie ed when H
→
0, o when h
i →
1. F om an economic s andpoin , his means ha
he con e gence will occu when c oss-sec ional a iance (H
) ends o ze o, o when he
ela i e ansi ion pa ame e (h
i
) ends o uni y (Mendez 2020). Fo he empi ical es ing
Economies 2024,12, 323 8 o 35
o he con e gence hypo hesis, Phillips and Sul (2007,2009) ha e p oposed he ollowing
log- eg ession model:
logH1
H −2log{log( )}=a+blog( )+ε ;
o =[ T],[ T]+1, . . . , T wi h >0 (13)
whe e [ T] s ands o he ini ial obse a ion, and o he ime span less o equal o 50 yea s,
Phillips and Sul (2007,2009) sugges se ing = 0.3. F om he Equa ion (13), he coe icien
bindica es whe he a io o c oss-sec ional a iance (H
1
/H
) is inc easing o dec easing.
When b is posi i e (nega i e), i indica es ha he c oss-sec ional a iance (H
) is inclined
o be smalle (la ge ) han he ini ial c oss-sec ional a iance (H1). S a is ically signi ican
and posi i e (nega i e) coe icien b sugges s con e gence (di e gence) among he c oss-
sec ional uni s o he sample (Mendez 2020). When bis no signi ican ly di e en om
ze o, bu he -s a is ic is abo e he h eshold alue, we canno ule ou he possibili y o
con e gence (Phillips and Sul 2009, p. 1168). F om he Equa ion (13), he ela i e con e -
gence (con e gence in g ow h a es) is achie ed when 0
≤
b< 2. Absolu e con e gence
(con e gence in le els) is achie ed when b
≥
2, and he con e gence speed is calcula ed as
b/2. The s a is ical signi icance o he coe icien b is based on one-sided es :
b=ˆ
b−b
Sb
=⇒N(0,1)(14)
When
b
<
−
1.65, he null hypo hesis o con e gence is ejec ed. The ejec ion o he null
hypo hesis o o e all con e gence sugges s ha he local con e gence clubs a e mo e likely
o exis . Phillips and Sul (2007,2009) ha e p oposed he da a d i ing clus e ing algo i hm
which is based on he logic ha coun ies a e anked, based on hei pe o mance by
g ouping he op-pe o ming economies oge he . Then log - es is applied o subg oups
o es o he con e gence. I he es esul s in con e gence, his g oup cons i u es a
con e gence club. I con e gence is no ound, he algo i hm emo es he wo s -pe o ming
economy om he g oup and e- es s he emaining economies o con e gence. This
p ocess con inues un il a subg oup o economies ha exhibi s con e gence is iden i ied,
o ming he i s con e gence club. Once he i s con e gence club is o med, he algo i hm
hen mo es on o he emaining economies ha we e no pa o he ini ial club. The same
p ocedu e is applied o hese economies o de e mine i hey o m ano he con e gence
club. This p ocess epea s, iden i ying addi ional clubs, un il no u he clubs can be
o med. A e mul iple con e gence clubs a e iden i ied, he algo i hm checks whe he any
o he clubs can be me ged. This is done by es ing i combining clubs’ esul s in a alid
con e gence g oup, using he log - es . The algo i hm consis s o i e s eps1:
7. C oss-sec ional o de ing;
8. Co e g oup o ma ion;
9. Sie ing indi iduals o new club membe s;
10.
Recu sion and s opping ule;
11.
Club me ging.
3.3. Da a
To measu e p oduc i i y, we will use he TFP, and o measu e ins i u ional quali y we
will use he WGI. The da a on he TFP a e collec ed om AMECO da abase, Pen Wo ld Table
(PWT) da abase (see (Feens a e al. 2015) and h ps://www. ug.nl/ggdc/p oduc i i y/
pw / (accessed on 20 Ap il 2024)), and om he Con e ence Boa d da abase. The da a
on he WGI a e collec ed om he Wo ld Bank. Da a, hei desc ip ion, and sou ces a e
p esen ed in Table 1.
Economies 2024,12, 323 15 o 35
i ely weak con e gence (posi i e b coe icien , bu s a is ically insigni ican ). The coe i-
cien b o Club2 and Club3 is posi i e, bu s a is ically insigni ican , which acco ding o
Phillips and Sul
(2007), also means weak con e gence. The coe icien b is less han 2 o
all h ee clubs, which means weak con e gence a a e y slow pace (1.25% o Club2, and
1.1% o Club3). Resul s o he inal club classi ica ions o he subsamples a e in he Ap-
pendix A. I we analyze only EU 14, om Table A1, he e a e h ee TFP con e gence clubs,
wi h nega i e coe icien b, wi h T s a abo e he h eshold, which means weak con e gence.
Fo he EU 13 coun ies, om Table A2, he e a e wo TFP con e gence clubs. The i s
Club consis s o en coun ies, wi h posi i e, and insigni ican b coe icien , which means
weak con e gence. The second Club consis s o h ee coun ies (CRO, HUN, SVK), wi h
s a is ically signi ican coe icien b abo e 2, which means s ong, absolu e con e gence.
Kijek e al. (2023) has iden i ied h ee TFP clubs o he EU egions o he 2008–2018 pe iod.
Kijek e al. (2023), iden i ied h ee TFP clubs, whe e high p oduc i i y Club3 is s onges
con e gence club, wi h posi i e and s a is ically signi ican b coe icien , and con e gence
speed a 15 pe cen . The coe icien b is less han 2, e lec ing ela i e con e gence. Mendez
(2020) iden i ied h ee clubs o he de eloped coun ies, and ou clubs o he de eloping
coun ies. In con as o Kijek e al. (2023) and Ha b e al. (2024), p oduc i i y clubs a
coun y le el a e cha ac e ized by weak con e gence among all uni s wi hin hose clubs
compa ed o much s onge con e gence among all uni s wi hin egional clubs.
Rega ding he WGI, he i s club consis s o 14 coun ies, and as in he case o he TFP,
mos o hese coun ies a e co e Eu opean coun ies (EU14-10 coun ies, EU13-5 coun ies).
Compa ed wi h he high p oduc i i y Club1, 9 coun ies om he high ins i u ional quali y
Club1, a e also membe s o he high p oduc i i y Club1. Coun ies om he low ins i u-
ional quali y Club2 and Club3 a e membe s o he low p oduc i i y Club2 and Club3.
The coe icien b is nega i e o all h ee clubs, wi h nega i e T s a , abo e he h eshold,
which means weak con e gence. Repo ed b coe icien in
Glawe and Wagne
(2021a) was
insigni ican and nega i e o Club1, while i was posi i e, and s ill insigni ican o Club2,
Club3, and Club4. Up un il 2018 he e we e ou clubs, wi h one di e gen g oup o wo
coun ies (Glawe and Wagne 2021a). Acco ding o Glawe and Wagne (2021a), Club1
is made up o se en coun ies, Club2 is made up o 4 coun ies, Club3 is made up o
eigh coun ies, Club4 is made up o six coun ies. In he las ou yea s he e has been a
consolida ion o he i s wo clubs, and o he las wo clubs. Resul s om Table A1 sugges
ha o he EU 14, he e a e ou con e gence clubs, wi h one no con e gen g oup (POR
and SPA), wi h nega i e b coe icien , wi h T s a is ics abo e he h eshold, which means
e y weak con e gence among all uni s wi hin hese clubs. When analyzing he o e all
WGI o he EU 13, esul s om Table A2 sugges s exis ence o wo clubs, wi h one no
con e gen g oup (BUL and EST), wi h insigni ican , and posi i e b coe icien , indica ing
weak con e gence.
Rega ding he WGI3, he i s club consis s o 15 coun ies, whe e mos o hese coun-
ies a e also membe s o he high ins i u ional quali y Club1 (WGI), and high p oduc i i y
Club1 (TFP). While membe s o he low ins i u ional quali y clubs a e also membe s o
he low ins i u ional quali y clubs (WGI), and low p oduc i i y clubs (TFP). The coe i-
cien b is posi i e, bu s a is ically insigni ican o he i s h ee clubs, which indica es
weak con e gence. The b coe icien o Club4 is nega i e, wi h nega i e T s a , abo e he
h eshold, which indica es weak con e gence. The speed o con e gence o he i s h ee
clubs is 36.5%, 5.5%, and 10%, espec i ely. Compa ed wi h Glawe and Wagne (2021a),
he clus e iza ion has been mo e p onounced in he las ou yea s. Up un il 2018, all b
coe icien s ha e been posi i e, e lec ing s onge con e gence. Analysis o he EU 14,
om Table A1, e eals he exis ence o h ee clubs. Club1 is weakes among hese h ee
clubs, wi h nega i e b coe icien , wi h T s a is ics abo e he h eshold. Club2 is s onges ,
wi h a posi i e and s a is ically signi ican b coe icien , which means ela i e con e gence
wi h speed o 47.5%. The b coe icien o Club3 is posi i e, bu insigni ican , indica ing
weak con e gence. Rega ding EU 13, he e a e ou clubs, and he b coe icien is posi i e
and insigni ican only o Club1. The b coe icien o Club2, Club3, and Club4 is nega i e,

Economies 2024,12, 323 16 o 35
bu he T s a is ics a e abo e he h eshold, which means weak con e gence among all uni s
wi hin hese clubs.
Rega ding he WGI4, Club1 consis s o 14 coun ies, and like in p e ious cases, hey a e
mos ly membe s o he p e ious high ins i u ional quali y clubs (Club1 WGI, and WGI3),
and high p oduc i i y Club1 (TFP). The b coe icien is nega i e o he Club1, wi h nega i e
T s a , abo e he h eshold, which indica es weak con e gence. Fo Club2, and Club3, he b
coe icien is posi i e, bu s a is ically insigni ican , wi h speed o con e gence a 13 and
16.5% espec i ely. In he las ou yea s he e has been a consolida ion o he i s wo clubs,
and o he las wo clubs, since he epo ed numbe o clubs (3) is less han i e epo ed
clubs in Glawe and Wagne (2021a). The b coe icien is posi i e o all i e clubs, which
indica es s onge con e gence (Glawe and Wagne 2021a). Fo he EU 14, he clus e ing
algo i hm con i ms he exis ence o he ou clubs, and one di e gen g oup (FRA). The b
coe icien is posi i e and insigni ican only o Club3. The es o he clubs ha e nega i e b
coe icien wi h T s a is ics abo e he h eshold, which means weak con e gence among all
uni s wi hin hese clubs. When analyzing he WGI4 o he EU 13, analysis e eals exis ence
o h ee clubs, whe e Club1 consis s o coun ies which a e membe s o high p oduc i i y
Club1 and p e ious high ins i u ional quali y clubs. The b coe icien is posi i e o all h ee
clubs, bu s a is ically insigni ican , e lec ing weak con e gence.
Rega ding he WGI5, Club1 consis s o 17 coun ies, whe e mos o hese coun ies
a e also membe s o he high ins i u ional quali y Club1 (WGI, WGI3, and WGI4), and
high p oduc i i y Club1 (TFP). While membe s o he low ins i u ional quali y clubs a e
also membe s o he low ins i u ional quali y clubs (WGI, WGI3, and WGI4), and low
p oduc i i y clubs (TFP). The b coe icien is posi i e only o Club3, wi h nega i e T s a ,
abo e he h eshold, which indica es weak con e gence among all uni s wi hin all h ee
clubs. Glawe and Wagne (2021a) ha e epo ed ou clubs wi h one di e ging g oup
( h ee coun ies). The b coe icien is nega i e only o Club4, which indica es s onge
con e gence (Glawe and Wagne 2021a). Rega ding he WGI5, he EU 14 coun ies om
Table A1, a e cha ac e ized by h ee clubs, wi h one di e gen g oup (SPA, FIN). The b
coe icien is posi i e, bu s a is ically insigni ican only o Club2, while i is nega i e wi h
T s a is ics abo e he h eshold e lec ing weak con e gence among all uni s wi hin hese
clubs. WGI5 o he EU 13, om Table A2, indica es exis ence o one club (11 coun ies),
and no con e gen g oup (BUL, EST).
We ha e iden i ied h ee clubs o WGI6. The b coe icien is posi i e and s a is ically
signi ican only o he low ins i u ional quali y Club3, wi h a e age speed o con e -
gence a 22%, e lec ing ela i e con e gence. The b coe icien is nega i e o he i s
wo clubs, wi h nega i e T s a , abo e he h eshold, which means weak con e gence.
Glawe and Wagne
(2021a) epo ed i e clubs wi h all b coe icien s being posi i e, e-
lec ing s onge con e gence. Fo EU 14, he e a e h ee clubs, all h ee wi h nega i e b
coe icien , and wi h T s a is ics abo e he h eshold e lec ing weak con e gence among all
uni s wi hin hese clubs. Rega ding WGI6, om Table A2, simila ly as o he WGI5, he e
is only one club (11 coun ies), and one non con e gen g oup (EST, HUN). Fo Club1, he
b coe icien is posi i e, bu s a is ically insigni ican , e lec ing weak con e gence among
all uni s wi hin he club. The numbe o iden i ied inal clubs in his su ey is always below
he numbe o iden i ied inal clubs in Glawe and Wagne (2021a).
We will only p esen he g aphs o he ansi ion cu es o he TFP, WGI, WGI3,
WGI4, WGI5, and WGI6. The ansi ion cu es be ween clubs and he indi idual pa hs
wi hin each club o each subsample a e in he Appendix A. Rega ding he ansi ion
pa hs displayed in Figu e 6, p oduc i i y di e gence be ween Club1 and Club2 has been
inc easing con inuously since 2011. Club 3 is cons an ly a 50% o he a e age o Club2,
and since he inancial c isis, Club2 and Club3 ha e almos he same, downwa d slope.
Economies 2024,12, 323 17 o 35
Economies 2024, 12, x FOR PEER REVIEW 17 o 36
downwa d slope. Fo he EU 13, Figu e A2 e eals wo clubs wi hou any sign o con e -
gence.
Figu e 6. T ansi ion pa hs o p oduc i i y clubs
Rela i e ansi ion pa hs a e displayed in Figu e 7.
Figu e 7. Rela i e ansi ion pa hs o p oduc i i y clubs.
Rega ding Club1, IRE, LUX, and MAL a e high abo e club a e age, while es o he
coun ies con e ge a ound Club1 a e age. Rega ding Club2, BEL, FRA, and NET a e
s a ing abo e he Club2 a e age, and in ime, hey decline, and close on he Club2 a e -
age. Es onia s a s below he club a e age, bu in ime con e ge o he Club2 a e age.
Rega ding Club3, only FIN and SPA a e abo e a e age, wi h a cons an slope. Res o he
Club3 coun ies ela i e ansi ion pa hs a e on, o below a e age, and in ime hey con-
e ge on Club3 a e age. Fo he EU 14, ou o coun ies who belong o he Club1, only
Figu e 6. T ansi ion pa hs o p oduc i i y clubs
The ansi ion pa h o Club1 is abo e he EU a e age, and i is upwa d, while
ansi ion pa h o he Club2 is downwa d, closing o he EU a e age. The ansi ion
pa h o Club3 is downwa d, and below he EU a e age. The only high p oduc i i y
club is Club1, bu wi h he weakes con e gence. Mendez (2020) iden i ied h ee clubs
o he de eloped coun ies, ega ding he agg ega e e iciency ( he TFP) wi h no sign o
con e gence. Fo he de eloping coun ies, Mendez (2020) iden i ied ou clubs, again,
wi hou signs o con e gence. When analyzing EU 14, om Figu e A1, he ansi ion pa hs
e eal a simila pa e n as on Figu e 6. The e a e clea ly sepa a ing endencies be ween
Club1 on one hand, and Club2 and Club3 on he o he hand, wi h clubs wo and h ee
showing a simila downwa d slope. Fo he EU 13, Figu e A2 e eals wo clubs wi hou
any sign o con e gence.
Rela i e ansi ion pa hs a e displayed in Figu e 7.
Economies 2024, 12, x FOR PEER REVIEW 17 o 36
downwa d slope. Fo he EU 13, Figu e A2 e eals wo clubs wi hou any sign o con e -
gence.
Figu e 6. T ansi ion pa hs o p oduc i i y clubs
Rela i e ansi ion pa hs a e displayed in Figu e 7.
Figu e 7. Rela i e ansi ion pa hs o p oduc i i y clubs.
Rega ding Club1, IRE, LUX, and MAL a e high abo e club a e age, while es o he
coun ies con e ge a ound Club1 a e age. Rega ding Club2, BEL, FRA, and NET a e
s a ing abo e he Club2 a e age, and in ime, hey decline, and close on he Club2 a e -
age. Es onia s a s below he club a e age, bu in ime con e ge o he Club2 a e age.
Rega ding Club3, only FIN and SPA a e abo e a e age, wi h a cons an slope. Res o he
Club3 coun ies ela i e ansi ion pa hs a e on, o below a e age, and in ime hey con-
e ge on Club3 a e age. Fo he EU 14, ou o coun ies who belong o he Club1, only
Figu e 7. Rela i e ansi ion pa hs o p oduc i i y clubs.
Economies 2024,12, 323 18 o 35
Rega ding Club1, IRE, LUX, and MAL a e high abo e club a e age, while es o
he coun ies con e ge a ound Club1 a e age. Rega ding Club2, BEL, FRA, and NET a e
s a ing abo e he Club2 a e age, and in ime, hey decline, and close on he Club2 a e age.
Es onia s a s below he club a e age, bu in ime con e ge o he Club2 a e age. Rega ding
Club3, only FIN and SPA a e abo e a e age, wi h a cons an slope. Res o he Club3
coun ies ela i e ansi ion pa hs a e on, o below a e age, and in ime hey con e ge
on Club3 a e age. Fo he EU 14, ou o coun ies who belong o he Club1, only I eland
and Luxembou g a e abo e club a e age, while es o he coun ies con e ge a ound
Club1 a e age. Fo he Club2, all coun ies a e g ouped a ound Club2 a e age. The same
conclusion goes o Club3. Fo he EU 13, only Cyp us and Mal a a e sys ema ically abo e
he a e age, while es o coun ies g oup a ound Club1 a e age. Fo Club2, all coun ies
a e con e ging o he Club2 a e age, wi h a downwa d endency. The ansi ion pa hs o
he WGI a e p esen ed in Figu e 8.
Economies 2024, 12, x FOR PEER REVIEW 18 o 36
I eland and Luxembou g a e abo e club a e age, while es o he coun ies con e ge
a ound Club1 a e age. Fo he Club2, all coun ies a e g ouped a ound Club2 a e age.
The same conclusion goes o Club3. Fo he EU 13, only Cyp us and Mal a a e sys ema -
ically abo e he a e age, while es o coun ies g oup a ound Club1 a e age. Fo Club2,
all coun ies a e con e ging o he Club2 a e age, wi h a downwa d endency. The an-
si ion pa hs o he WGI a e p esen ed in Figu e 8.
Figu e 8. T ansi ion pa hs o WGI.
High ins i u ional quali y Club1 has an upwa d ansi ion pa h, wi h a cons an ly
inc easing gap wi h he o he wo clubs. Club2 and Club 3 a e below he a e age, wi h
cons an , o downwa d ansi ion pa h. The coun ies ha belong o clubs whose ansi-
ion cu es a e abo e a e age and upwa d sloping a e on a high ins i u ional g ow h pa h
(Glawe and Wagne 2021a). Coun ies ha a e membe o a high ins i u ional quali y
Club1 a e on a high ins i u ional g ow h pa h. Coun ies whose ela i e ansi ion pa hs
a e below he c oss-sec ion mean and ha e a s agna ing and declining endency caugh in
a poo ins i u ional ap (Glawe and Wagne 2021a). Which means ha coun ies ha be-
long o Club2, and Club3 a e caugh in a poo ins i u ional ap. Compa ed wi h Glawe
and Wagne (2021a), we ha e iden i ied h ee clubs, wi h one di e ging g oup, while
Glawe and Wagne (2021a) ha e iden i ied ou clubs, wi h wo clubs abo e a e age, wi h
upwa d ansi ion pa hs, and wo clubs below a e age wi h downwa d ansi ion pa hs.
Fo he EU 14, Club 1 is sys ema ically abo e he a e age, while Club 4 is cons an ly below
a e age wi h a downwa d slope. Coun ies ha belong o Club 4 a e in a poo ins i u ional
ap. Coun ies ha belong o Club 2 and Club 3 a e s uck in a bad ins i u ional equilib-
ium (Glawe and Wagne 2021a). Fo he EU 13, he e a e wo clubs, wi h Club1 abo e he
c oss-sec ional a e age, and Club 2 below he c oss-sec ional a e age, wi hou a sign o
con e gence. Rela i e ansi ion pa hs a e p esen ed in Figu e 9.
Figu e 8. T ansi ion pa hs o WGI.
High ins i u ional quali y Club1 has an upwa d ansi ion pa h, wi h a cons an ly
inc easing gap wi h he o he wo clubs. Club2 and Club 3 a e below he a e age, wi h
cons an , o downwa d ansi ion pa h. The coun ies ha belong o clubs whose ansi ion
cu es a e abo e a e age and upwa d sloping a e on a high ins i u ional g ow h pa h
(Glawe and Wagne 2021a). Coun ies ha a e membe o a high ins i u ional quali y
Club1 a e on a high ins i u ional g ow h pa h. Coun ies whose ela i e ansi ion pa hs
a e below he c oss-sec ion mean and ha e a s agna ing and declining endency caugh
in a poo ins i u ional ap (Glawe and Wagne 2021a). Which means ha coun ies
ha belong o Club2, and Club3 a e caugh in a poo ins i u ional ap. Compa ed wi h
Glawe and Wagne
(2021a), we ha e iden i ied h ee clubs, wi h one di e ging g oup,
while Glawe and Wagne (2021a) ha e iden i ied ou clubs, wi h wo clubs abo e a e age,
wi h upwa d ansi ion pa hs, and wo clubs below a e age wi h downwa d ansi ion
pa hs. Fo he EU 14, Club 1 is sys ema ically abo e he a e age, while Club 4 is cons an ly
below a e age wi h a downwa d slope. Coun ies ha belong o Club 4 a e in a poo
ins i u ional ap. Coun ies ha belong o Club 2 and Club 3 a e s uck in a bad ins i u ional
equilib ium (Glawe and Wagne 2021a). Fo he EU 13, he e a e wo clubs, wi h Club1
abo e he c oss-sec ional a e age, and Club 2 below he c oss-sec ional a e age, wi hou a
sign o con e gence. Rela i e ansi ion pa hs a e p esen ed in Figu e 9.
Economies 2024,12, 323 19 o 35
Economies 2024, 12, x FOR PEER REVIEW 19 o 36
Figu e 9. Rela i e ansi ion pa hs o WGI by clubs.
Rega ding he high ins i u ional quali y Club1, mos coun ies a e abo e a e age
wi h s agna ing ela i e ansi ion pa hs, and s eep upwa d ela i e ansi ion pa hs cha -
ac e ize hose coun ies below a e age. Rega ding Club2, ela i e ansi ion pa hs o bo h
coun ies ha e a s agna ing endency. Fo Club3, coun ies which a e abo e a e age, hei
ansi ion pa hs a e s eep downwa d, while coun ies which a e below o a he c oss-
sec ion a e age, hei ansi ion pa hs a e cons an , o wi h upwa d slope. Fo he EU 14,
almos all coun ies which a e membe o he Club1 ha e an upwa d slope. Fo clubs wo
and h ee, coun ies con e ge a ound he a e age wi h cons an slope. And o Club4,
coun ies ha e a downwa d slope. Rega ding he EU 13, only Check Republic, La ia and
Li huania, om Club1, ha e a upwa d slope, while es o he coun ies a e expe iencing
cons an o nega i e slope. F om he Club2, only C oa ia and Romania, which a e below
he a e age, a e expe iencing he upwa d slope, while he es o he club is expe iencing
he downwa d slope.
T ansi ion pa hs o he WGI3, WGI4, WGI5, and WGI6 a e p esen ed in Figu e 10.
Compa ed wi h Glawe and Wagne (2021a), Club1 consis s o coun ies ha a e membe s
Club1, and Club2 om Glawe and Wagne (2021a). While Club2, and Club3 coun ies a e
membe s o Club3, and Club4 om Glawe and Wagne (2021a).
Fo all ou ins i u ional quali y a iables, only coun ies ha belong o high ins i u-
ional quali y Club1 a e on a high ins i u ional g ow h pa h, whe e only WGI3 Club1 has
posi i e b coe icien , wi h a e age speed o con e gence a 35.15%. while coun ies ha
belong o Club2, and Club3, o all ou ins i u ional quali y a iables, a e caugh in a poo
ins i u ional ap. Rega ding Club2, o he WGI3, hese coun ies a e di e ging om he
high ins i u ional quali y Club1 since he a e ma h o he inancial c isis, and hey ha e
d opped below he c oss-sec ion a e age in he middle o he las decade. I is sa e o say
ha hese coun ies ha e also been caugh in a poo ins i u ional ap, since 2015. Glawe
and Wagne (2021a) ha e also iden i ied only one high ins i u ional quali y Club1, on a
high ins i u ional g ow h pa h, o all ou ins i u ional quali y a iables, while es o he
clubs a e caugh in a poo ins i u ional ap o s uck in a bad ins i u ional equilib ium.
When analyzing EU 14, coun ies ha belong o high ins i u ional quali y Club1 a e on a
high ins i u ional g ow h pa h o all ou ins i u ional quali y a iables. Coun ies ha
Figu e 9. Rela i e ansi ion pa hs o WGI by clubs.
Rega ding he high ins i u ional quali y Club1, mos coun ies a e abo e a e age wi h
s agna ing ela i e ansi ion pa hs, and s eep upwa d ela i e ansi ion pa hs cha ac e ize
hose coun ies below a e age. Rega ding Club2, ela i e ansi ion pa hs o bo h coun ies
ha e a s agna ing endency. Fo Club3, coun ies which a e abo e a e age, hei ansi ion
pa hs a e s eep downwa d, while coun ies which a e below o a he c oss-sec ion a e age,
hei ansi ion pa hs a e cons an , o wi h upwa d slope. Fo he EU 14, almos all
coun ies which a e membe o he Club1 ha e an upwa d slope. Fo clubs wo and h ee,
coun ies con e ge a ound he a e age wi h cons an slope. And o Club4, coun ies
ha e a downwa d slope. Rega ding he EU 13, only Check Republic, La ia and Li huania,
om Club1, ha e a upwa d slope, while es o he coun ies a e expe iencing cons an
o nega i e slope. F om he Club2, only C oa ia and Romania, which a e below he
a e age, a e expe iencing he upwa d slope, while he es o he club is expe iencing he
downwa d slope.
T ansi ion pa hs o he WGI3, WGI4, WGI5, and WGI6 a e p esen ed in Figu e 10.
Compa ed wi h Glawe and Wagne (2021a), Club1 consis s o coun ies ha a e membe s
Club1, and Club2 om Glawe and Wagne (2021a). While Club2, and Club3 coun ies a e
membe s o Club3, and Club4 om Glawe and Wagne (2021a).
Fo all ou ins i u ional quali y a iables, only coun ies ha belong o high ins i-
u ional quali y Club1 a e on a high ins i u ional g ow h pa h, whe e only WGI3 Club1
has posi i e b coe icien , wi h a e age speed o con e gence a 35.15%. while coun ies
ha belong o Club2, and Club3, o all ou ins i u ional quali y a iables, a e caugh in
a poo ins i u ional ap. Rega ding Club2, o he WGI3, hese coun ies a e di e ging
om he high ins i u ional quali y Club1 since he a e ma h o he inancial c isis, and hey
ha e d opped below he c oss-sec ion a e age in he middle o he las decade. I is sa e
o say ha hese coun ies ha e also been caugh in a poo ins i u ional ap, since 2015.
Glawe and Wagne
(2021a) ha e also iden i ied only one high ins i u ional quali y Club1,
on a high ins i u ional g ow h pa h, o all ou ins i u ional quali y a iables, while es o
he clubs a e caugh in a poo ins i u ional ap o s uck in a bad ins i u ional equilib ium.
When analyzing EU 14, coun ies ha belong o high ins i u ional quali y Club1 a e on a
high ins i u ional g ow h pa h o all ou ins i u ional quali y a iables. Coun ies ha
belong o Club2 a e expe iencing cons an slope, a ound, o below he c oss-sec ional a e -
Economies 2024,12, 323 20 o 35
age. While coun ies ha belong o clubs h ee and ou a e caugh in a poo ins i u ional
ap. Fo he EU 13, only coun ies ha belong o high ins i u ional quali y Club1 a e on a
high ins i u ional g ow h pa h, while coun ies ha belong o o he clubs a e caugh in a
poo ins i u ional ap.
Economies 2024, 12, x FOR PEER REVIEW 20 o 36
belong o Club2 a e expe iencing cons an slope, a ound, o below he c oss-sec ional a -
e age. While coun ies ha belong o clubs h ee and ou a e caugh in a poo ins i u ional
ap. Fo he EU 13, only coun ies ha belong o high ins i u ional quali y Club1 a e on a
high ins i u ional g ow h pa h, while coun ies ha belong o o he clubs a e caugh in a
poo ins i u ional ap.
Figu e 10. Rela i e ansi ion pa hs o he WGIs by clubs.
In he nex s ep, we will es ima e he o de ed p obi model which will enable us o
iden i y he ac o s ha explain he o ma ion o p oduc i i y con e gence clubs ac oss
he EU. The O de ed P obi Model is a ype o eg ession used o a dependen a iable
ha is o dinal, meaning i s ca ego ies ollow a na u al o de bu do no ha e nume ically
meaning ul di e ences be ween hem. In his model, he ca ego ies a e anked (such as
“low”, “medium”, “high”), bu he gaps be ween he ankings a e no clea ly de ined in
e ms o size o alue. In ou case he dependen a iable is club membe ship, desc ibed
as he g oup o club o which a coun y belongs, showing ha he coun y is pa o a
subse o economies ha exhibi simila pa e ns o con e gence o de elopmen o e
ime. Clubs a e anked as i s (Club1), second (Club2), and hi d (Club3). While he o -
de ed p obi model is e ec i e o analyzing o dinal da a, i has limi a ions such as as-
sump ions abou linea i y, no mali y, and h eshold in e p e a ion.
The o de ed p obi model will be es ima ed wi h ma ginal e ec s (a means alues),
which a e calcula ed as a mean ma ginal e ec o each explana o y a iable. We will es-
ima e wo models. Model 1 will include he mean WGI, while model 2 will include indi-
idual WGIs. Resul s o he o de ed p obi model a e p esen ed in Tables 5 and 6. We
ha e applied he backwa d s epwise app oach, in o de o deal wi h mul icollinea i y,
which esul ed in he educed model. G aphs o he condi ional ma ginal e ec s a e in he
Appendix A.
Figu e 10. Rela i e ansi ion pa hs o he WGIs by clubs.
In he nex s ep, we will es ima e he o de ed p obi model which will enable us o
iden i y he ac o s ha explain he o ma ion o p oduc i i y con e gence clubs ac oss
he EU. The O de ed P obi Model is a ype o eg ession used o a dependen a iable
ha is o dinal, meaning i s ca ego ies ollow a na u al o de bu do no ha e nume ically
meaning ul di e ences be ween hem. In his model, he ca ego ies a e anked (such as
“low”, “medium”, “high”), bu he gaps be ween he ankings a e no clea ly de ined in
e ms o size o alue. In ou case he dependen a iable is club membe ship, desc ibed as
he g oup o club o which a coun y belongs, showing ha he coun y is pa o a subse
o economies ha exhibi simila pa e ns o con e gence o de elopmen o e ime. Clubs
a e anked as i s (Club1), second (Club2), and hi d (Club3). While he o de ed p obi
model is e ec i e o analyzing o dinal da a, i has limi a ions such as assump ions abou
linea i y, no mali y, and h eshold in e p e a ion.
The o de ed p obi model will be es ima ed wi h ma ginal e ec s (a means alues),
which a e calcula ed as a mean ma ginal e ec o each explana o y a iable. We will
es ima e wo models. Model 1 will include he mean WGI, while model 2 will include
indi idual WGIs. Resul s o he o de ed p obi model a e p esen ed in Tables 5and 6.
We ha e applied he backwa d s epwise app oach, in o de o deal wi h mul icollinea i y,
which esul ed in he educed model. G aphs o he condi ional ma ginal e ec s a e in he
Appendix A.

Economies 2024,12, 323 21 o 35
Table 5. Resul s o he o de ed p obi model, ma ginal e ec s (ey/ex), Model 1.
Dependen Va iable
Final Club
Model 1
Coe icien Ma gins o he Clubs
WGI −0.417 ***
(0.137) 10.626 ***
(0.106)
2−0.174 ***
(0.058)
3−0.584 ***
h−0.926 **
(0.498) 10.822 **
(0.374)
2−0.374 **
(0.224)
3−1.267 **
ICT −0.018 **
(0.007) 10.206 **
(0.089)
2−0.103 **
(0.047)
3−0.346 **
(0.157)
R&D 0.295 **
(0.132) 1−0.052 **
(0.023)
20.027 **
(0.013)
30.092 **
(0.042)
OPN −0.289 **
(0.125) 10.552 **
(0.463)
2−0.120 **
(0.230)
3−0.403 **
(0.793)
FDI 0.016
(0.027) 1−0.011
(0.038)
20.006
(0.021)
30.021
(0.068)
/cu 1 −4.363
(0.364)
/cu 2 −3.606
(0.957)
Log pseudolikelihood AIC BIC
−559.288 1134.576 1169.256
No es: Robus s anda d e o s in b acke s. All a iables a e exp essed in logs. Pseudo R
2
= 0.2328. * Signi icance
a 10%; ** signi icance a 5%; ***signi icance a 1%. Sou ce: Au ho s’ calcula ion.
Table 6. Resul s o he o de ed p obi model, ma ginal e ec s (ey/ex), Model 2.
Dependen Va iable
Final Club
Model 2
Coe icien Ma gins o he Clubs
WGI3 −1.526 ***
(0.305) 10.754 ***
(0.269)
2−0.854 ***
(0.181)
3−1.297 ***
(0.494)
Economies 2024,12, 323 22 o 35
Table 6. Con .
Dependen Va iable
Final Club
Model 2
Coe icien Ma gins o he Clubs
WGI4 −1.003 ***
(0.334) 10.935 ***
(0.283)
2−0.483 ***
(0.228)
3−1.680 ***
(0.623)
WGI5 −0.930 **
(0.376) 10.793 **
(0.299)
2−0.409 **
(0.221)
3−1.424 **
(0.634)
WGI6 −0.029
(0.256) 10.023
(0.178)
2−0.012
(0.131)
3−0.041
(0.381)
EDU −0.139 ***
(0.018) 19.332 ***
(1.211)
2−4.820 ***
(1.174)
3−16.767
(2.601)
OPN −0.430 ***
(0.182) 10.602 ***
(0.541)
2−0.828 ***
(0.455)
3−2.879 ***
(1.209)
PTNT −0.119 ***
(0.037) 10.270 ***
(0.041)
2−0.199 ***
(0.046)
3−0.579 ***
(0.106)
/cu 1 −14.475
(1.703)
/cu 2 −13.571
(1.695)
Log pseudolikelihood AIC BIC
−435.9238 889.8475 927.8863
No es: Robus s anda d e o s in b acke s. All a iables a e exp essed in logs. Pseudo R
2
= 0.2584. * Signi icance
a 10%; ** signi icance a 5%; ***signi icance a 1%. Sou ce: Au ho s’ calcula ion.
When compa ing he ou comes o Model 1, and Model 2 using Akaike’s in o ma ion
c i e ion (AIC), Bayesian in o ma ion c i e ion (BIC), and log pseudolikelihood, i is e iden
ha Model 2 is be e han Model 1, none heless, bo h es ima ions yield he same esul s.
Human capi al is he mos impo an d i e o club membe ship. An inc ease in he human
capi al index om Model 1, by 1 pe cen , on a e age, inc eases coun ies’ p obabili y o
being membe s o he high p oduc i i y Club1 by 0.8 pe cen . An inc ease in he g ow h
in labo quali y om Model 2, by 1 pe cen , on a e age, inc eases coun ies’ p obabili y
o being a membe o he high p oduc i i y Club1 by 9.3 pe cen , which is in line wi h
Economies 2024,12, 323 23 o 35
Kijek e al. (2023). These esul s a e in line wi h he economic heo y and wi h empi ical
e idence. Human capi al is a necessa y p econdi ion o inno a ion c ea ion. On he o he
hand, human capi al speeds up p oduc i i y g ow h by enabling he abso p ion o supe io
echnology, de eloped in he echnologically mos ad anced economies, and hus, helps
dec ease he p oduc i i y gap be ween he echnology leade and ollowing coun ies
(Nelson and Phelps 1966). Ins i u ional quali y a iables in bo h models a e also impo an
o club membe ship. An inc ease in he mean WGI, om Model 1, by 1 pe cen inc eases
coun ies’ p obabili y o being a membe o he high p oduc i i y Club1 by 0.626 pe cen .
On he o he hand, an inc ease in WGI3, WGI4, and WGI5, om Model 2, by 1 pe cen
inc eases coun ies’ p obabili y o being membe s o he high p oduc i i y Club1 by 0.754,
0.935, and 0.793 pe cen , espec i ely. These esul s also align wi h he economic heo y and
empi ical e idence. The di e ences in p oduc i i y be ween coun ies a e mainly d i en
by he di e ences in ins i u ions and go e nmen policies (Hall and Jones 1999). Nex o
he human capi al, ins i u ional quali y impac s a coun y’s abili y o abso b echnology
de eloped a he echnological on ie (Giuseppe and Sca pe a 2003;Ha ik e al. 2008;
Mc Mo ow e al. 2010;Bo o i´c and Radicic 2023). T ade openness o he coun ies has
been iden i ied as an impo an ac o de e mining he club membe ship. An inc ease
in ade openness o 1 pe cen inc eases coun ies’ p obabili y o being membe s o he
high p oduc i i y Club1 by 0.55 and 0.6 pe cen , espec i ely o Model 1 and Model 2.
Inc easing ade openness will lead o inc eased low o he capi al, goods, and se ices,
which will inc ease domes ic compe i ion and inno a ions h ough inc eased en u e
capi al supply. The numbe o pa en applica ions is also an impo an ac o o clubs’
o ma ion. An inc ease in pa en s applica ions o 1 pe cen inc eases coun ies’ p obabili y
o being membe s o he high p oduc i i y Club1 by 0.27 pe cen . All a iables a e a ec ing
he TFP as p edic ed by economic heo y, excep o he R&D. An inc ease in sha e o
he R&D expendi u e in he GDP o 1 pe cen dec eases coun ies’ p obabili y o being
membe s o he high p oduc i i y Club1 by 0.052 pe cen . Possible explana ion could be
educed ma ginal e u n o he R&D in he ad anced egions, while less ad anced egions
gain mo e om he inc eased R&D (Männasoo e al. 2018). Bu da and Se e gnini (2008)
we e analyzing he TFP con e gence o he Ge man s a es, and hey ha e also epo ed
he diminishing e u ns o he R&D. Ou esul s a e in line wi h hose o Männasoo e al.
(2018) and Bu da and Se e gnini (2008), an inc ease in sha e o he R&D expendi u e in he
GDP o 1 pe cen inc eases coun ies’ p obabili y o being membe s o he Club2 and Club3
by 0.027 and 0.092 pe cen .
5. Conclusions
In he p esen pape we in es iga ed he p esence o p oduc i i y and ins i u ional
con e gence clubs by applying he Phillips and Sul (2007,2009) me hodology. The main
idea is ha he exis ence o di e en p oduc i i y and ins i u ional clubs means a sys ema ic
di ide in he EU, which makes he EU mo e ulne able o ex e nal shocks. We ha e used
he WGI as an indica o o ins i u ional quali y, and he TFP as a measu e o p oduc i i y.
We ecognize ha he TFP is a p oblema ic concep and ha i s calcula ion in ol es ce ain
challenges. None heless, ou esul s o e insigh in o EU p oduc i i y de elopmen . Ou
sample co e s 27 EU coun ies o 2002–2023.
We ha e iden i ied h ee p oduc i i y clubs, and o ins i u ional quali y, we ha e
also iden i ied h ee con e gence clubs o he mean WGI, wi h one non con e gen g oup.
Fo he TFP, and o he mean WGI, membe s o he high ins i u ional and quali y Club1,
and high p oduc i i y Club1 a e mos ly membe s o he EU 14, wi h ew coun ies ha
ha e joined EU in 2004. And membe s o he low ins i u ional quali y Club3, and low
p oduc i i y Club3 a e mos ly loca ed in SE Eu ope. This conclusion goes o all ins i u-
ional quali y a iables. We ha e iden i ied ha membe s o he high ins i u ional quali y
Club1 a e mos ly membe s o he high p oduc i i y Club1. This conclusion also goes o all
ins i u ional quali y a iables, bu no o he subsamples. Simila ly o Kijek e al. (2023)
and Ha b e al. (2024), we ha e iden i ied exis ence o p oduc i i y con e gence clubs, wi h
Economies 2024,12, 323 24 o 35
membe s o he high p oduc i i y clubs a e mos ly loca ed in wes e n and no he n Eu ope,
while low pe o ming clubs a e loca ed in SE Eu ope. In ou case, I aly is a membe o
he high p oduc i i y Club1, which is in line wi h Kijek e al. (2023), ye Ha b e al. (2024)
iden i ied I alian egions as low pe o ming.
The p oduc i i y di e gence p ocess be ween Club1 and Club2 s a ed in he a e ma h
o he inancial c isis, while coun ies ha belong o he low pe o ming Club3 we e
cons an ly di e ging wi h a downwa d slope, isking eminding apped in p oduc i i y
ap. The di e gence be ween he clubs one and wo became mo e p o aned du ing he
COVID pandemic. Whe e high pe o ming coun ies we e able o o e come hese nega i e
shocks and o s ay on a high p oduc i i y pa h, while o he coun ies ailed. The wa in
Uk aine will de ini ely ha e mo e se e e consequence o he EU con e gence and i will
es he Unions cohesion o he maximum. Same conclusion goes o he subsamples.
In he case o he ins i u ional quali y a iables, de elopmen o he WGIs did no
change compa ed o Glawe and Wagne (2021a), bu wha is di e en is he numbe o he
inal clubs ha we ha e iden i ied, which is less han he numbe o clubs iden i ied by
Glawe and Wagne (2021a). This could be consequence o he al e na i e pos -clus e ing
algo i hms applied by Glawe and Wagne (2021a).
The ansi ion pa h o he ins i u ional WGI mean is simila , and di e en compa ed
o Glawe and Wagne (2021a). We ha e iden i ied one club being on he high ins i u ional
g ow h pa h, wi h wo clubs being caugh in he poo ins i u ional ap, wi hou any
sign o con e gence. Glawe and Wagne (2021a) ha e iden i ied wo clubs on he high
ins i u ional g ow h pa h, and wo clubs being caugh in he poo ins i u ional ap. These
di e ences could be consequence o he al e na i e pos -clus e ing algo i hms. O i could
be consequence o he COVID pandemic and wa in Uk aine, since Glawe and Wagne
(2021a) da a a e co e ing 2002–2018. We belie e ha COVID pandemic and especially wa
in Uk aine is a main cause o he weak ins i u ional con e gence. A simila conclusion
goes o he subsamples, and o he indi idual ins i u ional quali y a iables.
Ou analysis e eals ha he human capi al is he mos impo an ac o explain-
ing club membe ship, wi h ins i u ional quali y a iables in second place. Coun y’s
openness, ICT capi al and numbe o pa en s a e also e y impo an ac o s explaining
o ma ion o p oduc i i y clubs in he EU. Ins i u ional quali y has bo h di ec and in-
di ec impac o club’s o ma ion. Fi s , i impac s p oduc i i y di ec ly, and secondly,
i impac s p oduc i i y h ough inc eased human and ICT capi al, which is in line wi h
Rod íguez-Pose and Ganau (2022).
Ou esul s indica e ha he EU is highly ulne able o ex e nal shocks. This is
con i med no jus by he exis ence o a di ide be ween he high pe o ming no h-wes
and he low pe o ming sou h-eas , bu by he inc easing di e gence be ween clubs, which
o en s a s in he a e ma h o he c isis. Secondly, analysis e eals ha club o ma ion
is based mainly on geog aphic egion, wi h p ecise speci ica ion o which coun ies a e
high pe o ming, and which coun ies a e low pe o ming. The inancial c isis, COVID
pandemic, and wa in Uk aine ha e “shocked” he EU, and e en mo e in ensi ied al eady
exis ing di e ences in p oduc i i y and in he ins i u ional quali y. We ha e s essed
ha ins i u ional quali y de e mines he club membe ship, di ec ly and indi ec ly. We
ha e iden i ied ha wi hin he EU is achie ed g ow h wi hou cohesion. Which means
inabili y o achie e en i onmen al sus ainabili y and balanced and sus ainable g ow h o
all EU membe s.
Ou analysis has se e al policy implica ions. Fi s , o imp o e ins i u ional quali y, i is
essen ial o p io i ize egions ha a e alling behind, pa icula ly hose a isk o en e ing a
p oduc i i y ap, which could u he hinde hei de elopmen . The Ca ching-up Regions
Ini ia i e o e s a sui able amewo k o suppo hese lagging a eas. Howe e , o imp o e
i s e ec i eness, he ini ia i e needs o be es uc u ed, wi h mo e s a egic alloca ion o
unding. In ecen yea s, he ini ia i e has p ima ily ocused on egions in Eas e n Eu ope,
o en o e looking hose in Sou he n Eu ope. Second, simply inc easing inancial suppo
o unde de eloped egions is unlikely o yield esul s wi hou a comp ehensi e s a egy
Economies 2024,12, 323 31 o 35
Economies 2024, 12, x FOR PEER REVIEW 31 o 36
Figu e A7. Rela i e ansi ion pa hs o WGI by clubs, EU14.
Figu e A8. Rela i e ansi ion pa hs o WGI by clubs, EU13.
Figu e A7. Rela i e ansi ion pa hs o WGI by clubs, EU14.
Economies 2024, 12, x FOR PEER REVIEW 31 o 36
Figu e A7. Rela i e ansi ion pa hs o WGI by clubs, EU14.
Figu e A8. Rela i e ansi ion pa hs o WGI by clubs, EU13.
Figu e A8. Rela i e ansi ion pa hs o WGI by clubs, EU13.

Economies 2024,12, 323 32 o 35
Economies 2024, 12, x FOR PEER REVIEW 32 o 36
Figu e A9. Rela i e ansi ion pa hs o he WGIs by clubs, EU14.
Figu e A10. Rela i e ansi ion pa hs o he WGIs by clubs, EU13.
Figu e A9. Rela i e ansi ion pa hs o he WGIs by clubs, EU14.
Economies 2024, 12, x FOR PEER REVIEW 32 o 36
Figu e A9. Rela i e ansi ion pa hs o he WGIs by clubs, EU14.
Figu e A10. Rela i e ansi ion pa hs o he WGIs by clubs, EU13.
Figu e A10. Rela i e ansi ion pa hs o he WGIs by clubs, EU13.
Economies 2024,12, 323 33 o 35
Economies 2024, 12, x FOR PEER REVIEW 33 o 36
Figu e A11. Condi ional ma ginal e ec s.
No e
1. Fo mo e de ailed explana ion o clus e ing algo i hm s eps see Mendez (2020), Glawe and Wagne (2021a), and Phillips and
Sul (2007, 2009).
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