Abstract
The neoclassical growth model predicts convergence of productivity or per capita output levels across regions. We explore this hypothesis for Iranian regions. The analysis uses demand deposits as a proxy for regional GDP, because the latter has a high degree of imprecision. Moreover, the paper investigates the effects of rent-seeking on the convergence process. In contrast to previous papers, the analysis shows robust evidence in favour of both sigma and beta convergence across the Iranian provinces. In addition some indications on the adverse effect of rent-seeking on regional convergence is provided.
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