Absolute and Conditional Convergence in Both Zones of Cyprus: Statistical Convergence and Insitutional Divergence

Abstract

This paper implements a time series econometric model to determine the timing of full convergence of incomes and output per capita and total factor productivity in the North and South of Cyprus, regardless of whether there is a political settlement or not. A significant dimension of the paper is its emphasis on institutional convergence, going beyond econometric or statistical convergence. Our results reveal that North Cyprus needs 17 years to catch up to full per capita income convergence, 16 years for per capita output convergence and 17 years for full total factor productivity (technological) convergence. The time‐series findings demonstrate that statistical convergence is occurring quite rapidly as the North is catching up to the average income and productivity levels of the South, which may confirm evidence of unconditional (beta) or absolute convergence, but there are significant differences between North and South in savings, tastes, population growth and technology. Most significantly, there are institutional differences highlighted in the study with a Two‐sector model of gate‐keeping and rent‐seeking which validates the premises of conditional convergence. Put differently, there are strong forces of divergence hidden behind our statistical findings.

A transversal perspective on global energy production and consumption: An approach based on convergence theory

“…In central and eastern Europe as well as in Russia, the process of catching up has failed except in Poland and Slovenia. 9 However, also in Europe, Yorucu and Mehmet 10 detected an absolute and conditional convergence in Cyprus and found that northern is catching up to the levels of development of southern, although some differences remain at the institutional level.…”

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“…He is even critical of co‐convergence, a situation applicable to two sets of countries, each growing at different rates of convergence, and argues in favour of complexity of institutional differences between countries. Hay's () warnings on neo‐liberalism are significant as Yorucu and Mehmet () provided a supporting evidence of his views in a “Two‐Sector Model for divided Cyprus”. In the case of North Cyprus, the rapid growth of the informal economy since the admission of the southern part of the island into the EU, has created significant evidence of sigma convergence against a background of accelerated beta convergence.…”

ICT Diffusion in Developing Countries

“…(3.41). Seminal contributions in the field were made by, inter alia, Dowrick and Nguyen (1989), Barro and Sala-i-Martin (1990); Mankiw et al (1992), Quah ( , 1999, Pritchett (1997), Del Bo et al (2010), Schmitt and Starke (2011), Barro (2012), and Yorucu and Mehmet (2014). σ-, and β-convergence testing (both unconditional and conditional) is based on econometric procedures with cross-sectional data application (de la Fuente 2000).…”