Do Balkan economies catch up with EU? New evidence from panel unit root analysis

This paper explores empirically the issue of income convergence for the Balkans over the period 1994–2011. The investigation relies on income differentials from both the averages of the EU 15 and the EU 24 as well as within the Balkan group. The adopted methodology deploys the non stationary panel unit root framework to cope with the problem of limited sample providing more reliable insight. In particular, the analysis uses the univariate and panel minimum Lagrange Multiplier (LM) unit root tests, suggested by Lee and Strazicich (2003, 2004) and Im et al. (2005), which accounts for one and two endogenously determined structural breaks. The overall evidence is in favour of catching up with the EU benchmark cases as well as in favour of convergence within the Balkan area. However, disparities for some countries are confirmed.