Stochastic convergence in the industrial sector of the Mexican states

Abstract

We investigate the convergence process experienced by the industrial sector of the Mexican states covering the period 1960–1998. Our analysis indicates that misleading conclusions can be obtained if the presence of structural breaks is not taken into account when testing for the presence of convergence. Thus, after allowing for structural breaks evidence in favour of industrial labour productivity convergence is found using unit root tests for some Mexican states. However, empirical evidence suggests that states with the smallest industrial share diverge from below. Besides, states with the major industrial share diverge from above. A great majority of states are involved in clear convergence process.