Economic Growth and Convergence An Application to the Provinces of Turkey, 1975-1995

Recently, there has been an upsurge of empirical studies that test the convergence prediction of the neoclassical growth theory at the country, regional, state or provincial levels. These studies examine whether poorer economies will eventually catch up with richer ones in terms of both income levels and income growth. This study examines whether the less developed provinces are converging in labor productivity levels and productivity growth rates with the richer provinces in Turkey. The main finding is that there is absolute convergence in productivities across the provinces of Turkey. The convergence rate is faster in the 1980-95 period of economic and financial liberalization than in the 1975-95 period. Accounting for the differences in steady states and accounting for human capital, they are both found to increase the speed of convergence. Faster convergence rates are found for the somewhat homogenous relatively poorer and relatively richer provinces than for the total set of provinces. Policy implications of these findings are indicated.