Testing for Convergence of Aggregate and Sectoral Labor Productivity in Turkey : A Nonparametric Approach

This study examines the role that sectors play in aggregate convergence of provincial labor productivity across the 67 provinces of Turkey during the period 1975-1990. A Markov chain model is applied to characterize the long-run tendencies of productivity both at the aggregate and sectoral levels. To determine the likely sources of aggregate fluctuations, sectoral time-invariant distributions are compared with the aggregate distribution, and those sectors with the distributions similar in pattern to the aggregate distribution are chosen as dominant sectors. Evidence strongly suggests that the aggregate time-invariant distribution is mainly affected by agricultural, industrial and transportation sectors. Specifically, the pattern of polarization of productivity levels in these three sectors is very similar to the pattern prevailing at the aggregate level. Results suggest that, in the long run, two convergence clubs are likely to emerge - one for the agricultural and the other for the highly industrialized provinces. An exception is the service sector that exhibits global convergence