Club convergence and inter-regional inequality in Mexico, 1940-2015

ABSTRACT

In this paper, we analyse the convergence patterns in inter-regional inequality and income per capita for the Mexican states over the period 1940–2015. To that end, we apply a time-series approach considering temporal and transitional heterogeneity. Results indicate that Mexican states do not converge to the same long-run equilibrium. Instead of overall convergence, we find club convergence for both regional inequality and income per capita. The existence of clubs means that measures aimed at reducing income inequality and promoting regional growth should consider the specific characteristics revealed in the convergence analyses. Furthermore, pro-growth regional policies in Mexico may not necessarily reduce inter-regional income inequality. Income disparities thus need to be specifically addressed through pro-poor regional policies.

KEYWORDS:

• Club convergence
• income per capita
• regional inequality
• Mexico

JEL CLASSIFICATION:

• C33
• C80
• D63
• R11

Acknowledgments

Javier Ordóñez acknowledges the financial support from the Agencia Estatal de Investigación, Spain, and Fondo Europeo de Desarrollo Regional (AEI/FEDER ECO2017-83255-C3-3-P project). Javier Ordóñez and Mercedes Monfort are grateful for support from the University Jaume I research project UJI-B2017-33. Javier Ordóñez also acknowledges the Generalitat Valenciana project PROMETEO/2018/102. Vicente German-Soto acknowledges financial support from the Autonomous University of Coahuila. Alfonso Mendoza-Velazquez is grateful for support from UPAEP.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ See also German-Soto (2019) for additional information on the construction of this index.

² See German-Soto (2016) for a discussion of how this index satisfies the standard properties of inequality measures.

³ The systemic part contains both a constant and a time trend.

⁴ These conditions imply that the stochastic component declines asymptotically so that the trend vanishes, and each coefficient converges to $\delta$.

⁵ The Phillips-Sul methodology is based on the neoclassical growth model; it is therefore well-suited to testing the predictions of the model (convergence in both income per capita and its distribution). Furthermore, Bénabou (1996) suggests that the same tests, which are standard in the literature on convergence of income per capita, should be used to test for income inequality convergence.

Additional information

Funding

Javier Ordóñez acknowledges the financial support from the Agencia Estatal de Investigación and Fondo Europeo de Desarrollo Regional (AEI/FEDER ECO2017-83255-C3-3-P project), and the Generalitat Valenciana project PROMETEO/2018/102. Mercedes Monfort and Javier Ordóñez are grateful for financial support from the University Jaume I research project UJI-B2017-33.