Acta Universitatis Danubius. Œconomica, Vol 12, No 1 (2016)

Abstract

One of important subjects considered in models of economic growth is convergence hypothesis. It posits that if different regions have identical levels of log-term equilibrium per capita GDP, the poor regions would have higher rate of per capita GDP growth than rich ones. Therefore the more poor regions would converge towards richer regions in terms of economic conditions. However, since determining factors for long term per capita GDP is not the same in all of regions, the conditional convergence is suggested. This hypothesis states that farer regions from long term per capita GDP would have higher rate of per capita GDP. Since determining factors on economic growth can influence on convergence process, the impact of consuming petroleum products as a determining variable on economic growth has been studied. The model of Barro and Sala-I-Martin was applied in order to examine convergence and the impact of consuming petroleum products on convergence and also reduction of regional inequality among Iran's provinces from 2000 through 2011. Results indicated that there is an unconditional convergence among Iran's provinces and also variables of gasoline, diesel, and Mazut (fuel oil) have significant impact on economic growth and lead to negative convergence among Iran's province. Hence, respecting these results it can be concluded that using energy subsides cannot reduce regional inequality.