Abstract:

The Economic and Monetary Union, established within the European Union, aims to create a single market system, use a common currency across Europe, and achieve similar levels of public spending via implemented fiscal policies in member states. This study examines the convergence of total public expenditures and their sub-components by functional classifications across EU member states using the club convergence approach, which accounts for heterogeneity across countries. According to the total public expenditures, it has been found that member countries form four converging sub-clubs and one non-converging group. According to the functional classification findings, it has been found that member countries have converged in housing and community services expenditures and recreation, culture, and religious services expenditures, despite that they have grouped under different clubs in terms of other components. These findings indicate that member countries have different transition paths according to their public expenditures.

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