Income Convergence in Iranian Regions

The neoclassical growth model predicts convergence of productivity or per capita output levels across regions. We investigate this hypothesis for the Iranian economy using data on demand deposits as a proxy for GDP. Moreover, the analysis investigates the effects of rent-seeking on the convergence process. In contrast to previous papers, the analysis shows robust evidence in favour of both sigma and beta convergence across the Iranian provinces and provide some indications on the adverse effect of rent- seeking oil regional convergence.