Abstract
This paper analyzes the joint association of financial development and human capital with provincial income levels and convergence patterns in Türkiye from 2013 to 2023. The empirical framework is based on an augmented neoclassical growth (NCG) specification and is estimated for a balanced panel of 81 provinces. The methodology proceeds in three stages. First, a multidimensional Financial Development Index (FDI) is constructed by principal component analysis (PCA) and assessed using Kaiser–Meyer–Olkin and Bartlett diagnostics. Second, the determinants of the logarithm of real GDP per capita are estimated using two-step System GMM with Windmeijer-corrected standard errors (Windmeijer 2005), collapsed instruments, and standard diagnostic tests (AR(1), AR(2), Hansen, and difference-in-Hansen). The dynamic equation is estimated in income levels; its partial-adjustment interpretation is obtained algebraically by subtracting lagged income from both sides and should not be confused with the first-differencing transformation used internally by System GMM to remove province-specific effects. Because consistent province-level institutional-quality data are unavailable for the study period, province fixed effects and time dummies are used to absorb time-invariant provincial heterogeneity and common macroeconomic shocks, while institutional mechanisms are treated as contextual interpretation rather than directly estimated channels. Third, Phillips and Sul's (2007) log-t procedure is used to test for nationwide convergence and to identify convergence clubs. The estimates indicate that financial development and human capital are positively associated with provincial income, and their interaction is positive and statistically significant, consistent with a complementarity interpretation. The log-t results reject nationwide convergence and identify six convergence clubs with a pronounced east–west pattern. Sensitivity checks using alternative human-capital proxies, alternative financial-development measures, and alternative club-merging criteria preserve the qualitative conclusions, although the results should be read as conditional associations rather than causal effects. Given the non-spatial empirical design, geographical concentration and possible interregional spillover mechanisms are discussed only as background and interpretation, not as effects directly estimated by the model.
Keywords
Regional/Spatial Science; Landscape/Regional and Urban Planning; Microeconomics; Environmental Economics; Geography; general
Topics
Regional economics / Bölgesel iktisat Urban economics / Kentsel iktisat Economic convergence / Ekonomik yakınsama Human capital / Beşeri sermaye Spatial econometrics / Mekânsal ekonometri Financial development / Finansal gelişme Regional inequality / Bölgesel eşitsizlik Growth Dynamics JEL C2 · Single Equation Models • Single Variables / Tek Denklem Modelleri • Tek Değişkenler JEL J2 · Demand and Supply of Labor / Emek Talebi ve Arzı JEL O1 · Economic Development / İktisadi Kalkınma JEL O4 · Economic Growth and Aggregate Productivity / İktisadi Büyüme ve Toplam Verimlilik JEL R1 · General Regional Economics / Genel Bölgesel İktisat Regional/Spatial Science Landscape/Regional and Urban Planning Microeconomics Environmental Economics Geography General
JEL classification / JEL sınıflaması
- C21 Cross-Sectional Models • Spatial Models • Treatment Effect Models • Quantile Regressions
Yatay Kesit Modelleri • Mekânsal Modeller • Müdahale Etkisi Modelleri • Kantil Regresyonlar - J24 Human Capital • Skills • Occupational Choice • Labor Productivity
Beşeri Sermaye • Beceriler • Meslek Seçimi • Emek Verimliliği - O16 Financial Markets • Saving and Capital Investment • Corporate Finance and Governance
Finansal Piyasalar • Tasarruf ve Sermaye Yatırımı • Kurumsal Finans ve Yönetişim - O47 Empirical Studies of Economic Growth • Aggregate Productivity • Cross-Country Output Convergence
İktisadi Büyümenin Ampirik Çalışmaları • Toplam Verimlilik • Ülkeler Arası Çıktı Yakınsaması - R11 Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
Bölgesel İktisadi Faaliyet: Büyüme, Kalkınma, Çevre Sorunları ve Değişimler
JEL codes: American Economic Association classification. Turkish descriptions are an unofficial translation. Türkçe açıklamalar gayriresmî çeviridir.
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- APA 7
Tutar, H., Saldanlı, A., Kavas, Y. B., Medetoğlu, B., & Gün, M. (2026). Finance, Human Capital, and Regional Inequality in Türkiye: Unveiling Convergence and Growth Dynamics. The Annals of Regional Science, 75(4), 134. https://doi.org/10.1007/s00168-026-01577-5
- MLA 9
Tutar, H., et al. "Finance, Human Capital, and Regional Inequality in Türkiye: Unveiling Convergence and Growth Dynamics." The Annals of Regional Science, vol. 75, no. 4, 2026, pp. 134. https://doi.org/10.1007/s00168-026-01577-5.
- Chicago 17 (author-date)
Tutar, H., A. Saldanlı, Y. B. Kavas, B. Medetoğlu, and M. Gün. 2026. "Finance, Human Capital, and Regional Inequality in Türkiye: Unveiling Convergence and Growth Dynamics." The Annals of Regional Science 75 (4): 134. https://doi.org/10.1007/s00168-026-01577-5.
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@article{tutar2026finance,
title = {Finance, Human Capital, and Regional Inequality in Türkiye: Unveiling Convergence and Growth Dynamics},
author = {Tutar H. and Saldanlı A. and Kavas Y. B. and Medetoğlu B. and Gün M.},
year = {2026},
journal = {The Annals of Regional Science},
volume = {75},
number = {4},
pages = {134},
doi = {10.1007/s00168-026-01577-5}
}