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JSPES, Vol. 47, No. 1-2 (Spring-Summer 2022)
pp. 106-113

Within Economic Blocks, Countries and States Tend to Diverge (Not Converge)

Jorge Sá
Ana Lúcia Luís
Instituto Superior de Gestăo (ISG), Portugal

When countries form an economic block, they team up in order to benefit each other’s economies. The deals can range from just lower tariffs to something much more complex, as with the European Union (EU). There is considerable literature which indicates the trend toward convergence among members as one of the advantages of economic blocks. It is expected that benefits will be surplus to disadvantages and that integration in a block will lead to convergence. The expectation is that within economic unions, there is not only a general increase in welfare, but also economic convergence, greater income similarity among its members: since it is far easier to copy than to innovate, regardless of the type of innovations, the dissemination of innovations would create similar standards among all within an economic block. This article presents empirical evidence for the opposite, that within economic blocks, be they of countries or federal states, they tend to diverge, not converge. Analysis of EU countries and federal states of the U.S. shows a trend towards divergence.