Spatial dependence and regional convergence in Brazil

Abstract

The present paper introduces some spatial econometric techniques to the convergence issue among Brazilian states. State data over the 1970-95 period are considered to explore previous results that suggested convergence. As in the US case, strong patterns of spatial correlation are found during the period. The spatial econometric analysis reveals that spatial error dependence seems to be present resulting in the potential for model misspecification. The results indicate that, although some convergence among states is taking place, it seems to be more of regional phenomena or perhaps some type of club convergence than a global convergence process. States like São Paulo dominate the first group while the Northeast states form a second group or club.