Spatial Effects on Economic Convergence Among Mexican Firms

Abstract

After economic openness Mexico experienced a series of changes in its economic structure. These events led to changes in economic growth of cities, which affected firms’ decision on location. Using the developed model to measure conditional convergence and including the effect of geographic context, this paper explores the existence or lack of a process of convergence among the economic production of Mexican firms in municipalities from 2013 and 2018. Results reveal that from 2008 to 2013 firms’ production has experienced a process of divergence, and location determines the growth of firms’ output. The hypothesis that geographical location is a determinant of growth is supported. This suggests that location in regions with high levels of firms’ production positively affects the growth of production, and firms located in municipalities with higher levels of production reported greater growth than firms in municipalities with lower firms’ production levels. Also, the results of this study show that location determines the successful of firms. This indicates that firms’ production increases based on cluster.