This article investigates regional income convergence in Russia during 2000-2008. We test the hypothesis in which income divergence across regions of the country should give place to income convergence as the country moves toward free market economy with strong market institutions. The study contributes to the existing literature by using the exponential smooth autoregressive Augmented Dickey-Fuller (ADF) unit root test in a panel setup, a novel econometric technique, which encompasses cross sectional dependence. Results show strong evidence of on-going regional income divergence in post-reform period.
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