Respect to income convergence analysis: The case of the European Union and Turkey

The fact that the incomes of countries are different is one of the interesting issues of economics. Convergence is an important inference of the Neo-Classical Growth Theory, and since the 1980s, various methods have been developed to test whether countries are converging in terms of income. Turkey has been striving to become a member of the European Union (EU) since 1959 until today. Therefore, this thesis study aimes to examine the convergence of Turkey in terms of income to the European Union, of which it wants to become a member. In this direction, it is being tested whether Turkey is converging to the EU average income and the income of Germany and France, which are considered the leading countries; this analysis is carried out as of the EU enlargement periods. In the study, per capita income data from the World Bank database and Human Capital Index data from the Penn World Table 10.0 database are used for conditional convergence analysis. Time series and panel data analysis are used in the study. Absolute Beta Convergence, Conditional Beta Convergence and Sigma Convergence were investigated in the panel data analysis and only the Least Squares (OLS) test was performed due to the limitations imposed by the sample. For time series analysis, the ADF Unit Root Test is applied by squaring the logarithmic differences of the sample series, and their stationarities are examined at the level and the Nahar & Inder test, which suggests that the series can converge even if it is not stationary, has been applied. The reason why the Nahar & Inder convergence method was used in addition to Beta convergence and Sigma Convergence in the study is that it is a new method and the desire to compare the results. The periods created in the study were selected taking into account the EU enlargement periods. Thus, on convergence, whether there is convergence with Turkey in terms of the incomes of EU members in the selected periods, if any, shows more clearly the impact of EU enlargement processes on this. The results of the study are based on the results of the Nahar & İnder method due to the limitations of Beta Convergence and also the method is first time being used on the income convergence between EU and Turkey. When the test results are examined, it is seen that there is a convergence trend between Germany, which was chosen as the leading country, and Turkey. There is a divergence between the average per capita income of EU member states and Turkey's per capita income.