The long run industrial growth of Veracruz state, 1955-2008

Abstract

Purpose – Has the Mexican inter-regional growth and convergence experience also occurred within single regions? Using the important southern region of Veracruz, the purpose of this paper is to examine this question over a 48-year period within a single Mexican state. Design/methodology/approach – Growth is examined using a standard two input stochastic production function (SPF) that creates a measure of technical efficiency. Convergence is measured using a convergence equation from the literature but which also included the results from the SPF analysis to incorporate not only initial levels of inputs but also the ability of a municipio to utilize these inputs. Data collection in Mexico and online included a long run database of 149 municipios in Veracruz from 1960 thru 2008. Findings – A stochastic Cobb-Douglas technology is found to fit the long run growth of Veracruz province well. In the 1960s, 2000s and the long run (1960-2008), weak evidence for the municipios in Veracruz appear to be converging with a relatively higher level of technical efficiency resulting in slower growth of industrial labor productivity is found. Some very recent improvement in technical efficiency may be the result of institutional as well as economic reforms finally allowing an exiting of inefficient firms that has kept the levels of municipio industrial technical efficiency stagnant for decades at about 70 percent. Research limitations/implications – Data were limited to 149 municipios because of the need to track long run trends. Data were also limited by the need to use what was available in 1960 in a direct comparison with 2008. The design of the study was to use the technical efficiency index as a proxy for much of the missing data on institutions in the historic period. Panel data were used because the economic census is not done every year plus the turmoil in the Mexican economy in the 1980s thru the end of the 1990s make imputation of missing years at the local level quite difficult. Practical implications – The paper provides a baseline to analyze the long run intra-regional economic growth of other Mexican states which have a large number of municipios. It begins the exciting possibility of looking at Mexican long run growth from the municipio level which has historically played an important role in Mexico. Originality/value – This is the first study to examine long run growth within a Mexican state at the municipio level using both the production function and convergence literature. Results suggest several avenues for further research inside Veracruz and across Mexico.