CONVERGENCE OR DIVERGENCE? AN EMPIRICAL ANALYSIS FOR THE REGIONS OF TURKEY

Abstract

This study aims to investigate the convergence issue for the NUTS2 level regions of Turkey based on the neoclassical perspective in order to test the empirical power of neoclassical models. The difference and one of the contributions of this study is that it uses per-capita gross value added instead of per-capita income because of not only data limitations but also some advantages it has. For example, it is purer and it shows real production activities that is why using it is not a handicap rather it is better indicator for growth studies. The investigation period of this study is the years between 2005 and 2011 due to the lack of data. In empirical part, s convergence (both conditional and unconditional), ? convergence, and coefficient of variation method are tested in order to capture whether there exists convergence or not. Empirical results show that there is convergence between regions of Turkey. However, by investigating the descriptive statistics in the light of empirical results, it can be easily seen that the reason of convergence is the crisis (2008 crisis). Since our investigation period is too short, the empirical result is highly affected by the crisis so that it is impossible to infer that there is convergence. The reason of finding convergence in crisis is that 2008 crisis is related with financial sector and it affects rich regions more. Therefore, this type of convergence is deceptive. In other words, it does not show the real trend. Consequently, according to this work, we cannot infer that there is convergence, to say that we need reinvestigation with larger time period.