Regional income dynamics in Bangladesh

Bangladesh’s remarkable achievements in economic and social progress have placed the country in a position that was unimaginable just 20 years ago. However, has such improvement in development outcomes been equal across all areas within the country? We aim to address this question by analyzing district-level income per capita derived from the 2000 and 2016 rounds of the Household Income and Expenditure Survey. Using models based on standard neoclassical economic convergence theory, which may also account for natural disasters, we find little evidence of convergence. This suggests that income differentials among Bangladesh’s 64 districts persist. We also examined the possibility of multiple steady states by estimating models with a three-club structure based on income percentiles as registered in 2000. However, we found no evidence of conditional convergence. Additionally, we explored the potential for endogenous club formation using regression trees and machine learning algorithms. Yet, once again, the results did not support convergence. Overall, our findings reveal no evidence of conditional convergence in income among Bangladesh’s districts. This implies that policy implications might vary, with targeted interventions possibly necessary to address the specific factors hindering convergence among similar regions.