Turkey's per Capita Income Conversion to Southern European Countries

Abstract

In this paper we have estimated the number of years for Turkey’s per capita income to converge with those of Italy, Spain, Portugal and Greece. The estimate is based upon convergence theory of per capita income of laggard countries to that of advanced countries if (1) there exists a gap between the countries’ initial level of per capita income with the laggard country having the lower per capita income, (2) there exists a per capita productivity growth rate differential in favor of the laggard country and (3) sufficient time horizon considered to effectuate the convergence. In this instance all three conditions are met and assumed. According to our calculations, Turkey’s per capita income will converge with Portugal in 33 years, Greece in 39 years, Italy in 46 years and Spain in 62 Years, all within the 21st century time horizon. In addition the empirical and theoretical basis for conversion of per capita income is elucidated and verified. Using a wide cross section of countries we find evidence of unconditional income convergence looking at both the mean as well as at the entire income distribution via ordinary least squares and quintile regression respectively. We also analyzed the presence of an S-shaped growth curve for explaining the observed rapid progression of convergence and its impact on the expected future global income distribution.