The Effects of Public Capital on Regional Convergence in Turkey1

In recent years there have been many studies that explore the impact of public capital formation on economic growth at regional level, because public capital might give rise to reducing regional disparities across regions. Regarding Turkey, investigating the effects of public capital on economic convergence at the regional level gains importance since significant regional disparities exist between the regions. This study attempts to explore the dynamic effects of public capital on output per capita in terms of convergence in the Turkish regions. A conditional convergence model based on per capita GDP and public capital is estimated using the panel data set of Turkish regions at NUTS 1 level for the time period 1980-2001. The spatial effects are also investigated. The results show that there exists conditional convergence. The results also reveal that in some of the models public capital has a positive and significant effect on output per capita. However, in the models with spatial effects the public capital does not have a significant effect on regional convergence