The real Oaxaca decomposition: convergence within Mexico’s Oaxaca region in the twenty-first century—Do types of crime and religious belief matter?

Abstract

The paper empirically examines municipality convergence within Mexico’s southern Oaxaca region. We find municipalities are converging more rapidly than the “iron law” of 2% with up to 8% β convergence. Though homicides from the Drug War have negatively impacted growth, overall crime perhaps through strengthening local institutions has a positive but weak impact. Higher income inequality and Catholic belief are associated with higher per capita GDP growth in Oaxaca overall and within two microregions. The positive impact of a higher share indigenous population on growth in the relatively urban Valles Centrales microregion suggests a cultural element to policy making with the dependency ratio drag on growth suggesting a need for policies that give more attention to how retirees can continue to participate in the economy as well.