Intra-European Union trade openness and new members’ output convergence: A time-series analysis

The current literature on the 5th European Union (EU) enlargement shows widespread support of beta-convergence between old and new members but partial support in favour of stochastic convergence. In this paper, I try to assess whether this process may have been significantly facilitated by intra-EU trade using a range of cross-section or panel cointegration and causality tests. This is a possibility not accounted for in the standard neoclassical model, nor deeply investigated in the enlargement literature, but one which can potentially explain the differences researchers observe across countries. Preliminary evidence fails to confirm the predominant role of trade openness in stimulating output convergence suggested, at a more general level, by previous research.