Spatial Economic Convergence and Public Expenditure in Ecuador

Jorge Flores-Chamba,Ronny Correa-Quezada,José Álvarez-García,María Río-Rama

doi:10.3390/sym11020130

Abstract

In Ecuador, the sectorial policies, public policies and state investment, increase the presence of polarized and polycentric territories with very heterogeneous characteristics and with asymmetric levels of economic growth and development. The explanation for the unequal growth of regions in Ecuador is determined by the existence of different types of asymmetries; that determine economic dynamics and non-convergent development processes. The aim of this research is to determine the effect of an increase in public spending on physical infrastructure and education, on the improvement of productive conditions and on the process of reducing disparities (convergence) at the regional level in Ecuador. To do this, the hypothesis of beta convergence will be tested, which is conditioned by the proxy variables of public expenditure or investment in infrastructure and education at provincial level, for the 2001–2015 period. The results show the existence of a "slight" process of convergence per capita and productivity, although with a significant level of territorial "segregation". In the same way, it is observed that public investment made in this period did not increase the productivity of small and medium-sized provinces significantly, severely conditioning the sustainability of the process of reducing disparities at regional level.

Highlights

By considering space as one of the determining factors of economic activity behaviour enables us to understand the reason for an unequal growth of the territories that make up a nation
In Sala-i-Martín [62], it is pointed out that the study of economic convergence in the sense of a steady-state approximation emerged as a fundamental test to distinguish between new endogenous growth models of the early 90s and the traditional models of exogenous growth based on Solow [10]
A unit root test is performed to check the presence of stationary panels; a “pooling” test is carried out to determine the suitability of the use of the panel data methodology in the study of economic convergence per capita and in productivity for Ecuadorian regions; and the Hausman test is carried out to establish the relevance of an econometric estimation that allows for correlation between the constant term and regressors: fixed effects, or one where there is no such correlation: random effects (Table 2)

Summary

Introduction

By considering space as one of the determining factors of economic activity behaviour enables us to understand the reason for an unequal growth of the territories that make up a nation. It is important to point out that there are “natural” circumstances that drive the growth of regions, related to their location, their endowment of natural resources, skilled and unskilled labour and productive infrastructure, etc. External factors such as economic globalization, technological development and the “orientation” of the economic policy change these conditions, favouring the re-emergence of traditional economic sectors or the development of “innovative” economic activities that affect the sectorial structure of employment and the growth of territories. As Correa-Quezada [1] indicates, given the historical process of accumulation of the neoliberal model and its dependent articulation on the world market, it has been determined that sectorial policies, public policies and state investment, especially in infrastructure, in turn increase the presence of polarized and polycentric territories with very heterogeneous characteristics and with asymmetric levels of economic growth and development

Objectives

Methods

Results

Discussion

Conclusion