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Cantonal convergence in Ecuador: A spatial econometric perspective

Abstract:

The paper analyses the convergence process of Ecuadorian cantons during the period 2007-2012 accounting for the role of spatial spillovers through using spatial econometrics. The advantage of this technique is to provide reliable estimations because it takes into account the spatial interaction in the territory. In addition, it allows identifying clusters of cantons characterised by similar spatial patterns that can be interpreted as convergence clubs because they represent areas with similar initial conditions in the “basin of attraction” that, according to economic theory, converge to a common steady state equilibrium. The results highlight that a convergence process is present, but it involves the cluster of most developed cantons. This opens various policy implications related to i) the capacity of cantons to take advantage from the positive dynamics of neighbours, ii) the persistence of development in some circumscribed areas, and iii) the spatial unbalanced development.