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Testing Stochastic Convergence among Mexican States: A Polynomial Regression Analysis

Author

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  • Vicente German-Soto

    (Department of Business Administration, Bandirma Onyedi Eylul University, FEAS, Bandirma-10230, Balikesir, Turkey)

  • Natalia Salazar Garza

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.

Suggested Citation

  • Vicente German-Soto & Natalia Salazar Garza, 2016. "Testing Stochastic Convergence among Mexican States: A Polynomial Regression Analysis," Journal of Reviews on Global Economics, Lifescience Global, vol. 5, pages 36-47.
    • Handle: RePEc:lif:jrgelg:v:5:y:2016:p:36-47
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    File URL: http://www.lifescienceglobal.com/independent-journals/journal-of-reviews-on-global-economics/volume-5/85-abstract/jrge/2258-abstract-testing-stochastic-convergence-among-mexican-states-a-polynomial-regression-analysis
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    Cited by:

    1. Vicente German‐Soto & Konstantin Gluschenko, 2023. "Long‐term regional convergence in Mexico: A new look," Review of Development Economics, Wiley Blackwell, vol. 27(2), pages 963-991, May.
    2. German-Soto, Vicente & Gluschenko, Konstantin, 2021. "Long-Run Cross-State Growth Comparison in Mexico," MPRA Paper 109015, University Library of Munich, Germany.

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