Absolute convergence in manufacturing labour productivity in Mexico, 1993–2018: A spatial econometrics analysis at the state and municipal level

Abstract

This paper examines absolute manufacturing labour productivity convergence across Mexican states and municipalities between 1993 and 2018, using census data and employing spatial econometric techniques. It applies a novel approach (spatial econometrics and disaggregation at the municipal level) to show that there is absolute convergence in manufacturing productivity at both the state and municipal levels. The results show that there are significant productivity spillovers among states and municipalities; that is, high-level productivity states or municipalities have positive impacts on the productivity of neighbouring states or municipalities. The empirical evidence also shows that, on average, it takes a municipality 26.5 years to reduce 50% of the initial productivity gap, while for a state it takes 99.4 years.