CRITICAL ANALYSIS OF ECONOMIC CONVERGENCE

Critical Analysis of Economic Convergence

Critical Analysis of Economic Convergence

Introduction

During the last five to ten years many countries in Europe and United States of America are responding to the economic changes and have adopted these changes. The economies are integrating with each other through trade and financial flow. The countries have faced convergence issues in different areas like in terms of improvement in the per capita income, productivity and growth, increase in the levels of GDP, improvement in labour productivity, structural changes in the markets of different countries, increase in investment and foreign direct investment. Thus many economic analysts gave their view that the convergence in different areas is not economic but it is the flow of finances in these economies. The research report will take into consideration different articles in order to provide a critical view of the economic convergence in many parts of the economies.

Discussion

According to Broys (et al, 2008, pp.7-8) supported the argument of economic convergence and thus highlighted the areas in which this convergence has taken place. The researchers have given their view that many economies will face different challenges while adopting the economic challenges. The economic convergence leads to development in several countries but factors like timing, speed and ability to improve the economic conditions slows down the process of development. For example Turkey is the only country today that has not transited and therefore the development patterns are different in the country. The researchers have identified key are that have converged economically and have brought improvement in many countries. Firstly the most notable improvement is in the level of income per capita revenues especially in the European countries. Secondly one of the major forces of economic convergence is the Total Factor Productivity growth and increases development in many countries.

The researchers have also criticised the economic convergence as in many countries the transition is conditional. Many institutions in a country are reluctant towards adopting the changes which is the reason that they react negatively to economic convergence. Another critique view of the researchers was that although the economic convergence led towards improvement in the labour productivity, as result of increase in output but on the other hand it also leads towards decline in the employment level of the economy. Researchers criticize the economic convergence as there has been a shift from agricultural sector towards service or manufacturing sectors but the structural changes according to economists are temporary and thus it creates mismatches in the increasing labour markets in many parts of the world.

According to another research by Quah (1995) the study has critically analysed the view that economic convergence has reduced the importance of growth theories, but the findings of the researcher showed that economic convergence has not been able to reduce the importance of growth theories. The researcher gave his view that convergence is related to the dynamics of economic increasing income distributions, it develops a connection between the policies related to the growing inequality, stagnation situations and ability ...