Testing Stochastic Convergence among Mexican States: A Polynomial Regression Analysis

Authors

  • Vicente German-Soto Faculty of Economics, Autonomous University of Coahuila
  • Natalia Salazar Garza Faculty of Economics, Autonomous University of Coahuila

DOI:

https://doi.org/10.6000/1929-7092.2016.05.04

Keywords:

Convergence, polynomial regression, economic growth, Mexican states

Abstract

Another look on the economic convergence among Mexican states is offered examining whether they are approaching along 1940-2010. Methodology is based on polynomial regressions, a method that determines whether predictions can be significantly improved by increasing the complexity of the fitted straight-line model. Estimates from a set of polynomial terms are a theoretical approximation to income differentials, so it constitutes an adequate frame to analyze if different initial conditions tend to diminish in the long-run. We calibrate for each economy the polynomial equation of best adjustment supported in information criteria and a strategy of backward iterative elimination. Empirical results are according with the stochastic convergence, but in a relationship where it changed after trade opening, poorer states are diverging and richer states are converging. A focalized regional policy is necessary with the aim to correct the biases produced in a context where some regions are lagging while others more are advancing.

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Section

Special Issues | Economic Growth and Convergence: Analyses for the Mexican States