Convergence and Catching-up Hypotheses in Local Governments: A New Evidence from the North Cyprus Municipalities
DOI:
https://doi.org/10.4335/20.4.765-783(2022)Keywords:
local government, convergence, catching-up, half- life, North Cyprus economyAbstract
One of the most important aims for local governments is usually based on how they improve their own performance. This steps from growth of the population, scarcity of government resources, increased of the demand for essential government services and budget deficit as well as indebtedness. Local administrations are attempting to reduce the burden on these issues by enhancing their own performance. This paper empirically investigates the convergence hypothesis if the similar local governments within the country converge to the same long-run steady state by considering the five major Turkish Cypriot municipalities in the North Cyprus economy over the period 2004Q1-2019Q4 in terms of economic performance. The concepts of half- life and catching-up hypotheses are conducted to find the economic distance among the municipalities. The results indicate that the municipalities with the lowest number of people per staff, commonly converge to the group mean (Morphou and Iskele). Nicosia and Kyrenia municipalities are less productive than the other municipalities, but Famagusta municipality needs less years than Kyrenia and Nicosia to catch-up the leader one (Morphou municipality). The results also suggest that one of the most important reasons for being less productive is related with over-employment and non-qualified workers, so municipalities need to come up with a new strategy to recruit qualified staff for the most appropriate position. The second one stems from their activities which covered by a grant that the municipalities receive from the central government.
References
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Skidmore, M. & Deller, S. (2008) Is local government spending converging?, Eastern Economic Journal, 34, pp. 41-55, https://doi.org/10.1057/palgrave.eej.9050019.
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Quah, D. (1996) Empirics for economic growth and convergence, European Economic Review, 40(6), pp. 1353-1375.
Ravallion, M. (2003) Inequality convergence, Economics Letters, 80(3), pp. 351-356.
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Rodríguez-Oreggia, E. (2007) Winners and Losers of Regional Growth in Mexico and their Dynamics, Investigación Económica, 66(259), pp. 43-62.
Smirnov, A., Lavrinenko, O., Ohotina, A., Shmarlouskaya, H., & Betlej, A. (2019) Assessment of Convergence Process of Social-Economic Security Indicators in Latvian Municipalities, Journal of Security & Sustainability Issues, 9(2), pp.663-674.
Solow, R. (1956) A contribution to the theory of economic growth, Quarterly Journal of Economics, 70(1), pp.65-94, https://doi.org/10.2307/1884513.
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Szekely, M., Lopez-Calva, L. F., Rascon, E., Melendez, A. & Rodríguez-Chamussy, L. (2007) Poniendo a la pobreza de ingresos y a la desigualdad en el mapa de Mexico, Economía Mexicana, 16(2), pp. 239-303.
Tiruneh, M. W. (2003) Absolute convergence across time and space: new empirical evidence for an old debate, Journal of Economics, 51(10), pp. 1270-129.
Tsionas, E. G. (2000) Real convergence in Europe. How robust are econometric inferences?, Applied economics, 32(11), pp. 1475-1482.
Veganzonzes, M. A. & Winograd, C. (1996) Human Capital, Trade Openess and Convergence: The Economic Growth Of Argentina in the XXth Century, Delta Working Papers, 96-25 (Paris: Ecole normale supérieure).
Verspagen, B. (1994) Technology and Growth: The complex dynamics of convergence and divergence, In: Silverberg, G. & Soete, L. (eds.) The Economics of growth and technical change: Technologies, nations, Agents (England: Edward Elgard), pp. 154-181.
Vogelsang, T.J. (1998) Trend function hypothesis testing in the presence of serial correlation, Econometrica, 66(1), pp. 123-148, https://doi.org/10.2307/2998543.
Youkta, K. & Paramanik, R.N. (2020) Convergence analysis of health expenditure in Indian states: Do political factors matter?, GeoJournal, 87(4), pp. 1-10, https://doi.org/10.1007/s10708-020-10313-1.
Wolff, E. N. (1991) Capital formation and productivity convergence over the long term, American Economic Review, 81(3), pp. 565-57.
Wu, F. (2015) Local Government Competition and Industrial Structure Convergence, In: Liu, Z. & Li, X. (eds.) Transition of the Yangtze River Delta, New Frontiers in Regional Science: Asian Perspectives, 5, (Tokyo: Springer), pp. 159-184, https://doi.org/10.1007/978-4-431-55178-2_7.
Andrade, E., Laurini, M.P., Madalozzo, R. & Valls, P.L. (2002) Testing convergence across municipalities in Brazil using quantile regression, Ibmec Working Paper, No. 14 (São Paulo: IBMEC).
Andrade, E., Laurini, M., Madalozzo, R., & Pereira, P. L. V. (2004) Convergence clubs among Brazilian municipalities, Economics Letters, 83(2), pp. 179-184, https://doi.org/10.1016/j.econlet.2003.11.005.
Fedajev, A., Radulescu, M., Babucea, A.G., Mihajlovic, V., Yousaf, Z. & Milićević, R. (2021) Has COVID-19 pandemic crisis changed the EU convergence patterns?, Economic Research/Ekonomska Istraživanja, 35(1), pp. 2112-2141, https://doi.org/10.1080/1331677X.2021.1934507.
Barro, R.J. (1991) Economic growth in a cross section of countries, Quarterly Journal of Economics, 106(2), pp. 407-443, https://doi.org/10.2307/2937943.
Barro, R.J. & Xavier, S.M. (1992) Convergence, Journal of Political Economy, 100(2), pp. 223-251.
Benedek, J., Cristea, M. & Szendi, D. (2015) Catching up or falling behind? Economic Convergence and Regional Development Trajectories in Romania, Romanian Review of Regional Studies, 11(1), pp.15-34.
Bernard, A. (1992) Empirical implications of the convergence hypothesis, MIT Working Paper (Cambridge: M, A).
Campell, J.Y. & Mankiw, G. (1989) International evidence on the persistence of economic fluctuation, Journal of Monetary Economics, 23(2), pp. 319-333.
Davison, A. & Hinkley, D. (1997) Bootstrap Methods and Their Application, Journal of the American Statistical Association, 94(1).
Dickey, D. A. & Fuller, W. A. (1979) Distribution of the estimators for autoregressive time series with a unit root, Journal of American Statistical Association, 74(366a), pp. 427-431.
Dickey, D. A. & Fuller, W. A. (1981) Likelihood ratio statistics for autoregressive time series with a unit root, Econometrica, 49(4), pp. 1057-72.
Dowrick, S. & Nguyan, D. T. (1989) OECD comparative economic growth 1950-1985: Catch up and convergence, American Economic Review, 79(5), pp. 1010-1030.
DPO (2021) State Planning Organization, available at: https://www.dpo.gov.ct.tr/index_en.html (January 10, 2020).
Esquivel, G., Nora, L. & John, S. (2010) A Decade of Falling Inequality in Mexico: Market Forces or State Action?, In: López-Calva, L.F. & Lustig, N. (eds.) Declining Inequality in Latin America: a Decade of Progress? (Washington D.C.: The Brookings Institution Press), pp. 175-278.
Gimenez, J.C., Montañés, A. & Tadeo, A.J.P. (2019) Performance and convergence in municipal waste treatment in the European Union, Waste Management, 85, pp. 222-231, https://doi.org/10.1016/j.wasman.2018.12.025.
Giudici, E. & Mollic, V.A. (2008) Convergence in the Eastern Caribbean States, Springer-Verlag, 42, pp. 893-909, https://doi.org/10.1007/s00168-007-0186-7.
Ismail, N. W. (2008) Growth and convergence in ASEAN: a dynamic panel approach, Journal of Economics and Management, 2(1), pp. 127−140.
Kufenko, V., Prettner, K. & Geloso, V. (2020) Divergence, convergence, and the history-augmented Solow model, Structural Change and Economic Dynamics, 53(C), pp. 62-76.
Kwiatkowski, D., Phillips, P. C. B., Schmidt, P. & Shin, Y. (1992) Testing the null hypothesis of stationarity against the alternative of a unit root: How sure are we that time series have a unit root?, Journal of Econometrics, 54(1-3), pp. 159-178.
Laurini, M., Andrade, E. & Pereira, P.L.V. (2005) Income convergence clubs for Brazilian Municipalities: a non-parametric analysis, Applied Economics, 37(18), pp. 2099-2118, https://doi.org/10.1080/00036840500218554.
Lim, L. K. & McAleer, M. (2004) Convergence and catching up in ASEAN: A comparative analysis, Applied Economics, 36(2), pp. 137-153.
Linden, M. (2002) Trend model testing of growth convergence in 15 OECD countries, 1946-1997, Applied Economics, 34(2), pp. 133-142.
Luintel, K. B., Matthews, K., Minford, L., Valentinyi, A. & Wang, B. (2020) The role of Provincial Government Spending Composition in growth and convergence in China, Economic Modelling, 90, pp. 117-134, https://doi.org/10.1016/j.econmod.2020.04.024.
Mankiw, N. G., Romer, D. & Weil, D. N. (1992) A contribution to the empirics of economic growth, Quarterly Journal of Economics, 107(2), pp. 407-437, https://doi.org/10.2307/2118477.
Marelli, E.P., Parisi, M.L. & Signorelli, M. (2019) Economic convergence in the EU and Eurozone, Journal of Economic Studies, 46(7), pp. 1332-1344, https://doi.org/10.1108/JES-03-2019-0139.
Skidmore, M. & Deller, S. (2008) Is local government spending converging?, Eastern Economic Journal, 34, pp. 41-55, https://doi.org/10.1057/palgrave.eej.9050019.
Phillips, P. C. B & Perron, P. (1988) Testing for a unit root in time series regression, Biometrica, 75(2), pp. 335-346, https://doi.org/10.1093/biomet/75.2.335.
Peseran, H. & Peseran, B. (1997) Microfit 4.0: an Interactive Econometric Software Package (User Manual) (Oxford: Oxford University Press).
Quah, D. (1992) International patterns of growth: International persistence in cross-country disparities, LSE Working paper (LSE Economics Department, Citeseer).
Quah, D. (1993) Empirical Cross Section Dynamics in Economic Growth, European Economic Review, 37(2-3), pp. 426-434, https://doi.org/10.1016/0014-2921(93)90031-5.
Quah, D. (1996) Empirics for economic growth and convergence, European Economic Review, 40(6), pp. 1353-1375.
Ravallion, M. (2003) Inequality convergence, Economics Letters, 80(3), pp. 351-356.
Ribeiro, E. P. & Pôrto Júnior, S. S. (2002) Crescimento e Convergência - Uma Análise Empírica para a Região Sul, Anais do Encontro de Economia da Região Sul, 2000.
Rodríguez-Oreggia, E. (2007) Winners and Losers of Regional Growth in Mexico and their Dynamics, Investigación Económica, 66(259), pp. 43-62.
Smirnov, A., Lavrinenko, O., Ohotina, A., Shmarlouskaya, H., & Betlej, A. (2019) Assessment of Convergence Process of Social-Economic Security Indicators in Latvian Municipalities, Journal of Security & Sustainability Issues, 9(2), pp.663-674.
Solow, R. (1956) A contribution to the theory of economic growth, Quarterly Journal of Economics, 70(1), pp.65-94, https://doi.org/10.2307/1884513.
Swan, T. W. (1956) Economic growth and capital accumulation, Economic record, 32(2), pp. 334-361, https://doi.org/10.1111/j.1475-4932.1956.tb00434.x.
Szekely, M., Lopez-Calva, L. F., Rascon, E., Melendez, A. & Rodríguez-Chamussy, L. (2007) Poniendo a la pobreza de ingresos y a la desigualdad en el mapa de Mexico, Economía Mexicana, 16(2), pp. 239-303.
Tiruneh, M. W. (2003) Absolute convergence across time and space: new empirical evidence for an old debate, Journal of Economics, 51(10), pp. 1270-129.
Tsionas, E. G. (2000) Real convergence in Europe. How robust are econometric inferences?, Applied economics, 32(11), pp. 1475-1482.
Veganzonzes, M. A. & Winograd, C. (1996) Human Capital, Trade Openess and Convergence: The Economic Growth Of Argentina in the XXth Century, Delta Working Papers, 96-25 (Paris: Ecole normale supérieure).
Verspagen, B. (1994) Technology and Growth: The complex dynamics of convergence and divergence, In: Silverberg, G. & Soete, L. (eds.) The Economics of growth and technical change: Technologies, nations, Agents (England: Edward Elgard), pp. 154-181.
Vogelsang, T.J. (1998) Trend function hypothesis testing in the presence of serial correlation, Econometrica, 66(1), pp. 123-148, https://doi.org/10.2307/2998543.
Youkta, K. & Paramanik, R.N. (2020) Convergence analysis of health expenditure in Indian states: Do political factors matter?, GeoJournal, 87(4), pp. 1-10, https://doi.org/10.1007/s10708-020-10313-1.
Wolff, E. N. (1991) Capital formation and productivity convergence over the long term, American Economic Review, 81(3), pp. 565-57.
Wu, F. (2015) Local Government Competition and Industrial Structure Convergence, In: Liu, Z. & Li, X. (eds.) Transition of the Yangtze River Delta, New Frontiers in Regional Science: Asian Perspectives, 5, (Tokyo: Springer), pp. 159-184, https://doi.org/10.1007/978-4-431-55178-2_7.
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2022-11-02
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