THE EFFECTS OF PUBLIC CAPITAL ON REGIONAL CONVERGENCE IN TURKEY

Ozlem Onder, Metin Karadag, Ertugrul Deliktas

Department of Economics, Ege University

Aim of the Study

to investigate the impact of public capital on regional convergence in Turkey at NUTS 1 level by using dynamic panel data model for the time period 1980-2001

Table 1: Basic Data for Turkish Regions at NUTS I Level

NUTS I Regions Population in Year 2000 (000)

Share of the total population in 2000 (%)

GDP per capita in 2000 (YTL, in)(1987 prices)

Real GDP as a Proportion of Turkey’s Average in 2000

Share of total Gross Domestic Product in 2000

Share of total Pub. Invest.Expend. on average (1980-2000)

Istanbul 10018.7 14.78 2644.2 150 22.18 11.52

Western Marmara 2896.0 4.27 1998.2 113 4.84 4.23

Aegean8938.8 13.18 2037.6 116 15.25 18.31

Eastern Marmara 5741.2 8.47 2573.9 146 12.37 8.86

Western Anatolia 6443.2 9.50 2062.1 117 11.12 12.35

Mediterranean 8706.0 12.84 1653.1 94 12.05 12.04

Central Anatolia 4189.3 6.18 1251.5 71 4.39 6.07

Western Black Sea 4895.7 7.22 1373.5 78 5.63 7.06

Eastern Black Sea 3131.5 4.62 1108.1 63 2.90 2.87

North Eastern Anatolia 2507.7 3.70 744.3 42 1.56 2.83

Middle Eastern Anatolia 3727.0 5.50 844.1 48 2.63 4.90

South Eastern Anatolia 6608.6 9.75 917.1 52 5.07 8.96

Turkey 67803.9 100.00 1760.9 100 100.00 100.00

Methodology Conditional Convergence Model (Mankiw

et al. 1992) Dynamic Panel Data Model (Islam, 1995)

itititiit upubcapyy 11 lnlnln

= per capita real income,

= real public capital stock,

ity

1itpubcap

Methodology Spatial Panel Data (Elhorst, 2003) Fixed Effect Spatial Lag Model (FSLM)

Fixed Effect Spatial Error Model (FSEM)

ititititiit upubcapyyWy 11 lnlnlnln

itititiit upubcapyy 11 lnlnln

ititit Wuu ,0)( itE 2)( itVar

Data

Annual data on per capita real income and public capital stock at NUTS-1 level regions of Turkey between 1980-2001.

Table 3: Estimation ResultsDependent Variable: yit

PooledLSDV GMM-SYS

Constant 0.114(0.98)

-1.431(-1.35)

yit-1 0.975***(93.49)

0.880***(35.39)

0.851***(17.30)

pubcap it-1 0.007(0.35)

0.056*(1.72)

0.154***(2.30)

Convergence rate λ 0.025 0.128 0.160

R2 0.982 0.983

N 252 252 252

Instruments diagnostics

Hansen 11.87

AR(1)c -2.87***

AR(2) -0.71

Table 4: Estimation Results with Spatial EffectDependent variable: yit

FSLMFSEM

yit-1 0.812***(18.481)

0.831***(25.204)

Pubcap it-1 0.041(1.345)

0.004(0.176)

W.yit 0.09*(1.846)

0.613***(0.000)

Convergence rate λ 0.208 0.185

R2 0.985 0.990

N 252 252

Questions for further study

Is it possible to apply spatial panel data models to dynamic panel data models

Convergence rates What are specification tests for

panel data