Theoretical and Applied Economics (Oct 2006)
The European Model: Economic Growth, Convergence and Cohesion
Abstract
The european model is confronted with a potential crise. Economic convergence concerns the gaps in living standards between countries: are they closing or widening, and at what speed? Are relatively poor economies to remain poor for many generations? Are the rich countries of next century to be the same as relatively rich countries of nowadays? Is the degree of income inequality across economies increasing or falling over time? Posing these questions, motivating convergence debate, immediately raises the problem of the variable/variables that need to be considered. In our study, prior to providing answers to these questions, basic definitions concerning convergence in European model are followed by an overview of specific features, achievements and hurdles countries have had to overcome on their way from centrally planned towards market economy. After that, a summary of Solow-Swan model of economic growth is offered. Concept of convergence emerges here as a natural implication of the model. The distinctions between Solow-Swan model and endogenous growth model are stated. Finally, some measures of macroeconomic policy for sustainable growth are presented and interpreted in connection with real macroeconomic situation of the Romanian economy.
