Inside the EU Economic Space: Ex-post Convergence vs EMU-OCA Challenges

This paper moves from the Krugman-Euro-OCA European debate and aims to capture additional insights on the Krugman caveats, exploring their spatial side. LB concentration/specialization indices for 98 NUTS1 regions in the 2000-2014 time span are quantified. To test and estimate the convergence/divergence patterns in the context of EU regional policy, a model is developed in the “Complexity-Meso Economics” framework where: a. The steady state condition, assumed as continuously shifting, represents the result and a new impulse for a platea of adapting decision makers; b. A chained Total Factor Productivity Transfer (TFPT) is included as a relevant factor in explaining the regional convergence/divergence process. The results on the methodological side are consistent with the hypothesis of the transitional adaptive behavior of the EU regions with shifting steady state condi-tion. The introduction of the TFPT variable, measuring purchasing power transfers among regions, improves the estimates, contributing to a better explanation of the role of economic, political and structural components in the process of searching for transitional steady state conditions. On the operational side, some positive effects of the territorial EU policies, in-cluding industrial and capacity building policies, are captured. The unsolved question is whether such effects are counterbalanced by the im-pacts of EU restrictive fiscal policies (fiscal compact). Finally, some policy insights starting from the political statements of both the Five Presidents Report and the very new "Towards a European Pillar of Social Rights" report are discussed.