This paper examines economic and institutional convergence between EU Core, EU New, and Western Balkan countries over the period 2004–2023 using a comprehensive panel dataset and multiple convergence frameworks. Evidence of absolute β-convergence is found, although at a slow pace, while conditional specifications show that structural and institutional factors explain growth differences; institutional quality appears to affect growth primarily through direct effects rather than through significant interaction-based β-convergence. A Principal Component Analysis-based Institutional Index (PC1) explains 90% of the variance in institutional quality, highlighting its role in shaping cross-country growth differentials rather than directly influencing convergence speed. Group-specific models reveal heterogeneous convergence paths across European regions. EU Core economies exhibit relatively stable convergence patterns, reflecting their proximity to steady-state income levels. In contrast, EU New and Cohesion Economies do not display statistically significant β-convergence, suggesting that catch-up processes are uneven and not uniformly driven by initial income differences. Western Balkan economies show weak and limited convergence patterns, reflecting persistent structural and institutional constraints. Robustness tests (FE/RE, Hausman, VIF, Breusch–Pagan, residual diagnostics) confirm the validity of the results. Findings suggest an important role of institutional quality in supporting long-term growth and the accession process of the Western Balkans. Policy implications highlight the importance of governance reforms, human capital development, and EU integration mechanisms in accelerating convergence.
Lalić et al. (Sun,) studied this question.