National Accounts Data incl 2019.dta

This paper investigates the evolution of regional income inequality in Turkey during the last two decades from the standpoint of income convergence hypotheses. Using economic data from both national accounts and households at various territorial disaggregation the study finds spatially robust evidence for the “advantage of backwardness” which turns the focus on the closely related question: does poverty convergence accompany income convergence among regions? The results from poverty convergence regressions suggest on the contrary that poverty is falling relatively faster in regions with a lower poverty headcount at baseline. This study suggests as a novelty the club convergence as the basis of this contradictory finding. We find six convergence clubs with large gaps both in club-specific steady states and growth performances. Nonetheless, economic growth transitioning appears to hold between poor and rich regions as the data suggests a trend of upgrading in club membership over time and convergence among parts of subsequent growth clusters. The future harbors hope for poverty convergence among Turkish regions especially if regional policies focus on increasing human and physical capital and improving the industrial structure in lagging regions as these structural characteristics are found to be the key determinants of club formation besides initial income which calls for income transfers from rich to poor regions.