1 Are Living Standards converging in the EU? Empirical Evidence from Time Series Analysis. Elias Soukiazis* Abstract The propose of this paper is to test the convergence hypothesis using an alternative approach by examining directly the time series properties of the per capita income variable among the EU countries. This approach has been developed recently in the attempt to understand regional differentials in the living standards among different economies. This issue is extremely important for the EU after establishing the criteria of nominal convergence and going ahead with monetary union and the single currency. The important question to address here is whether the integration process in Europe has had a strong impact in reducing the differences in living standards (measured by real GDP per head) among the 15 member States of the EU, over the period 1960-1997. To answer this crucial question a different approach to convergence is applied using a time series analysis based on the concept of co-integration. The paper is organised as follows: the introduction briefly discusses the different approaches which are used to test the convergence hypothesis. Section 2 explains the alternative time series approach in the light of the stationarity and co-integration definitions which can be used to test for convergence. Section 3 describes the data and outlines the empirical evidence on the convergence of living standards among the EU countries over the period 1960-1997. The last section concludes, summarising the main findings. Keywords: σ and β convergence, living standards, unit root and cointegration tests Acknowledgements: The author would like to thank Professor Tony Thirlwall for helpful discussions and encouragement during the preparation of this paper. The author is also very grateful to Dr. Miguel Leon- Ledesma and Mr. Alan Park for precious help. Correspondence Address: Faculdade de Economia Universidade de Coimbra, Av.Dias da Silva,165, 3004-512 Coimbra, Portugal. Email: Elias@sonata.fe.uc.pt * Assistant Professor at the University of Coimbra, Faculty of Economics, Portugal and visitor at the Department of Economics , Keynes College, University of Kent at Canterbury, U.K.