Interregional labor productivity convergence in Turkey: spatial panel data analysis between 2005-2011

The purpose of this study is to investigate interregional labor productivity convergence in 26 subregions at Nomenclature of Territorial Units for Statistics (NUTS) -2 level in Turkey for seven years period between 2005-2011 in three sector disaggregation. In this study, spatial panel data analysis has been employed to investigate the interregional convergence in Turkey. To the best of our knowledge, this is one of the first study in Turkey that employs this approach in convergence studies. Spatial panel data analysis, incorporates the advantages of panel data with spatial data. So it allows more degrees of freedom, more variability and less collinearity among the variables and hence improves the efficiency of the estimation along with the inclusion of locational interactions and neighborhood effects. Based upon these reasons one can get much more reliable results by using spatial panel data. This study, will fill an important gap in existing empirical convergence literature by employing spatial panel data analysis. Analysis results shows us that absolute and conditional convergence in 26 subregions at NUTS-2 level in Turkey is highly significant for all agriculture, industry and services sector and also in total. While this result is not necessarily surprising, it can be said that some empirical findings in this study has never been shown before in the literature. All sectoral convergence studies in the literature which takes spatial interactions in consideration finds spatial effects significant. But we found that, while industry, services and sectors total show spatial interactions, there is no strong evidence of spatial interaction in agricultural sector for Turkey. Structural problems in agricultural sector in Turkey, are considered to be the main reason behind this findings.