Regional disparities and determinants of growth in Mexico

Developing countries such as Mexico, in which profound processes of economic liberalization have taken place over the last few decades, offer fertile terrain for studies of regional disparities. Mexico has experienced a history of polarization between regions, the industrialized north and the underdeveloped south, which have seen their differences widen, exacerbated through recurrent crises and liberalization processes. This paper looks at the convergence process among regions, examining which factors might affect regional growth, tracking the evolution of single units and identifying winners and losers. The evidence shows that northern states, bordering the USA, moved from a condition that might be described as `falling-behind' prior to liberalization to that of a `winner' after that process, while southern states went from the position of `catching-up' to that of `loser'. Regional disparities in human capital would appear to be playing a decisive role in the existence of differences. The author acknowledges comments from Gilles Duranton, Henry Overman, Andrés Rodríguez-Pose, two anonymous referees, and participants in seminars in The London School of Economics and the European University Institute.