Abstract
Solow (1956) has made an essential contribution to the Neo-classical growth approach through the economic convergence hypothesis. It assumes that poorer countries’ or regions’ per capita incomes tend to grow at faster rates than the richer ones. Convergence could occur either among a group of economies with the same steady states or within regions in which their fundamental dynamics differ, and thus they exhibit multiple steady states. This study aims to investigate convergence with respect to GDP per capita across NUTS 2 regions in Turkey for the time period 2004–2014. In the convergence process, we also inquire into role of government in terms of regional government investments and fixed investment incentives. All the empirical results confirm the validity of the convergence hypothesis at a regional level. Also, in the context of the convergence process, it is possible to conclude that the role of government is likely to be decisive in solving regional economic disparities.
Highlights
In regard to Neo-classical growth theory, Solow (1956) asserts that poorer countries’ or regions’ per capita incomes tend to grow at faster rates than richer ones
This study aims to empirically investigate convergence across NUTS 2 regions in Turkey for time period between 2004 and 2014
We conducted an analysis based on the coefficient of variation (CV), cross-sectional ordinary least squares (OLS), and panel data in the context of the σ and β convergence approaches
Summary
In regard to Neo-classical growth theory, Solow (1956) asserts that poorer countries’ or regions’ per capita incomes tend to grow at faster rates than richer ones. All countries or regions should converge in terms of per capita income eventually. In recent years, such a catch-up effect has been often discussed in many of the growth studies. Along with emerging datasets covering a large number of countries, evolution of the convergence process has begun to be re-examined. In this regard, most researchers have focused on the question of whether per capita income tends to converge over time across countries or regions
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