Energy reform and energy consumption convergence in Mexico: A spatial approach

Abstract

• β-convergence in energy consumption per capita across Mexican states is studied. • Financial crisis and energy reform pre—and post—periods are examined. • Aftermath periods of both the crisis and reform vanish the convergence patterns. • Both absolute and conditional β-convergence in per capita energy consumption exist. • OLS and spatially dynamic models are used to control for spatial correlation. • Higher catch-up faced by least developed economies is found through spatial models. • There is evidence in favor of a curve of efficient energy development (CEED). This paper examines the convergence of energy consumption per capita (ECPC) in the 32 Mexican states from 2002 to 2017. Regardless of the recent Global Financial Crisis and Mexican Energy Reform, we first find evidence of a positive, increasing, and statistically significant spatial correlation of ECPC across states. Using cross-section and spatial dynamic econometric models, we document absolute and conditional β -convergence in ECPC during the pre-crisis, pre-Energy Reform, post-Energy Reform, and the whole study period. We report stable and larger convergence rates in spatial dynamic models, close to 20%, versus 3% without spatial effects. These figures suggest between-states relationships are crucial in Mexico. We also find an inverted U-shape relationship between ECPC and GDP per capita.