Convergence among the Regions of Turkey: Evidence from Random Coefficient Models

In this study, we test whether there is income convergence among the regions of Turkey at the NUTS-2 level over the period 1991-2000. We use the random coefficient model for this purpose, which have been developed instead of fixed coefficient models and assumes economical relationships varies among the regions. We investigated whether there is absolute and conditional convergence or not for both among the regions and average of the regions. We used the rate of deposits in gross domestic product as a proxy for financial development to represent possible disparities among the regions and concluded that there is both absolute and conditional convergence for the average of the regions. On the other hand, at the regional level, there is absolute convergence for 17 regions and conditional convergence for 25 regions. Also, we found that the deposits have positive effect on per capita income as we expected.