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Sectorial Specialization, human capital and regional income in Ecuador

Abstract:

The regional income disparities are an issue of wide interest in the academic environment and in the design and implementation of economic policies. Real income per capita is an approximate measure of development. Countries where per capita income is not distributed equally over the national territory, present challenges associated with efficiency and lack of opportunities for the inhabitants of less developed regions. In Ecuador, there are significant spatial differences in the level of per capita income at the provincial level and it is most evident at the cantonal level. The data show that regions with high incomes are specialized in manufacturing and services, and its population has a high average level of schooling. This reality suggests that human capital and the sectorial specialization determine the level of income and the consequent regional disparity. In this context, the objective of this research is to examine the effect of the average level of human capital and sector specialization in regional income gap of the 221 cantons of Ecuador. We use cross-sectional data from 2010, obtained from the National Institute of Statistics and Census (INEC) and Central Bank of Ecuador (BCE). In addition, we analyze the existence of spatial dependence of income. This dependence arises due the interaction between regions, caused by the effects of spills of knowledge and the distribution of economic activities in the territory.