Absolute and Conditional Convergence in Both Zones of Cyprus: Statistical Convergence and Insitutional Divergence

摘要

We can highlight three main conclusions emerging from our study. First, our time-series findings demonstrate that statistical convergence is occurring quite rapidly as North Cyprus is catching up to the average income and productivity levels of South Cyprus. This may confirm evidence of unconditional or absolute convergence, but significant differences between North and South in savings, tastes, population growth and technology remain. Most significantly, there are institutional differences of gate-keeping and rent-seeking, which validates the premises of conditional convergence. Put differently, there are strong forces of divergence hidden behind our statistical findings of convergence.