Regional Economic Divergence And Inequality In Mongolia: A Multidimensional Analysis With A Focus On The Gobi Region

Abstract

This study aims to examine the dynamics of regional economic growth and income inequality in Mongolia over the period 2000-2024, using the theoretical framework of neoclassical economic growth. Employing a comprehensive dataset, the analysis integrates multiple econometric methods, including conditional β-convergence and σ-convergence tests, Markov transition matrices, kernel density estimation, and inequality measures such as the Gini coefficient and Theil index. The results indicate statistically significant evidence of β-convergence, suggesting that provinces with lower initial income levels tend to grow faster. However, σ-convergence, which measures the reduction in income dispersion over time, is not observed at the national level. The only region showing statistically significant σ-convergence is the Khangai region. In contrast, the Gobi region exhibits increasing intra-regional income disparities driven by structural differences in sectoral composition and resource concentration. Markov chain analysis reveals that high-income provinces, such as Umnugobi, maintain their economic dominance, while low-income provinces show limited upward mobility. Kernel density plots reveal a shift from an unimodal to a bimodal distribution, indicating the emergence of a dual economy. The steady rise in the Gini and Theil indices further confirms the deepening inequality, particularly linked to the expansion of the mining sector and disparities in infrastructure and institutional capacity. The findings underscore the need for a more balanced regional development strategy that focuses on diversifying the economic base, improving access to infrastructure and social services, and strengthening institutional effectiveness. Without such measures, regional disparities may continue to widen, undermining the long-term sustainability of inclusive economic growth in Mongolia.