Income Inequality and Economic Convergence in Turkey: A Spatial Effect Analysis

Abstract

Even though the convergence of regional per capita income has been a highly debated issue internationally, empirical evidence regarding Turkey is limited as well as contradictory. This article is an attempt to investigate regional income inequality and the convergence dynamics in Turkey for the time period 1987-2001. First, the Theil coefficient of concentration index is used to analyze the dispersion aspects of the convergence process. The geographically based decomposition of inequality suggests a strong correlation between the share of interregional inequality and spatial clustering. Then, we estimate convergence dynamics employing alternative spatial econometric methods. In addition to the global models, we also estimate local models taking spatial variations into account. Empirical analysis indicates that geographically weighted regression improves model fitting with better explanatory power. There is considerable variation in speed of convergence of provinces, which cannot be captured by the traditional beta convergence analysis.

The spatial effect of fiscal decentralisation on regional disparities: the case from Indonesia

“…This paper conducted several statistical analyses to explore Indonesia disparities, both non-spatial and spatial analysis. The first non-spatial analysis is Theil index, an entropy calculation that decomposed inequality index analysis from a higher spatial scale to lower level regions and also both between and within groups of regions [Canaleta et al, 2004;Yildirim et al, 2009]. This study considers hierarchical structure of inequality in Indonesia: region, provinces, and districts.…”

“…The spatial error model observes spatial dependence that operates through the error process. The implication of this analysis is that as regions have the same steady-state, regions are therefore converging to the same long run growth path [Yildirim et al, 2009].…”

“…This implies that while there is convergence, it is not spatially independent and there is movement of similar growth with its neighbors. Using AIC measurement, Yildirim et al [2009] shows the GWR model explain variations of per capita income in absolute and conditional convergence better than the global spatial analysis and OLS models. The GWR analysis allows the research to identify divergence of regional growth and found that government expenditure increases inequality between regions.…”

“…F. Aritenang Agency for the Assessment and Application of Technology email: a.aritenang@gmail.com ing empirical studies and literature on this subject. For example, spatial econometrics analysis with in regional convergence in the US [Rey and Montouri, 1999] and in Turkey [Yildirim et al, 2009], and there are also studies on the spatial effect of trade liberalization such as by Özyurt and Daumal [2013].…”

Regional Economic Convergence in Turkey: Does the Government Really Matter for?

“…Within the 1975-2001period, Erlat (2005 also does not find a clear evidence of convergence across provinces or regions. Another study by Yildirim et al (2009) attempts to explore the causes of regional income inequalities and the convergence process across NUTS 1 regions for the 1987-2001 period. The results support the β-convergence hypothesis in terms of the higher speed of convergence in the relatively poorer Eastern and Southeastern regions.…”