Analyzing Government Policies and Regional Convergence in Iran's Provinces by using Demand Deposits

There has been an increasing interest in examining regional convergence in the field of economic growth models in the past decade. A standard method of examining convergence has been the method introduced by Barro and Sal-I-Martin (1991, 1992, 1995). Although there have been many extensions in examining convergence and especially in line with endogenous growth models, but there has been few studies to analyze the effects of government policies on regional convergence. We have examined convergence in Iran's provinces by using per capita demand deposits (a method first applied by Rahmani and Eckey (2004)). The results on convergence are mixed. By assuming convergence (which is confirmed by empirical on Beta-convergence), we have examined the effects of government policies by using some indexes. The empirical results imply that the speed of convergence across Iran's provinces has been lowered by the government policies. Therefore, this study shows that government policies to reduce the gap between provinces have not been successful in Iran.