Abstract
This minor dissertation analyses income convergence across South African provinces for the years from 1995 to 2013 using panel data estimation techniques. The results show evidence in support of conditional beta convergence. This suggests that provinces furthest from their steady state level converge faster than provinces closer to their steady state GDP per capita level, thus implying convergence. The convergence speed was estimated to be 7 per cent per annum. Thus, it will take each province eight years on average to address 50 per cent of the gap between the initial GDP per capita level and the steady state GDP per capita level. However, further analysis show that convergence is more rapid amongst a group of “rich” provinces than a group of “poor” provinces, suggesting that disparity in GDP per capita between poor and rich provinces will continue to prevail despite the overall convergence observed. The size of the manufacturing sector was found to accelerate convergence, while population growth and government expenditure have served to slow down the convergence process in South Africa.
M.Com. (Development Economics)