Regional Output Convergence in Mexico

We examine the behavior of output disparities of Mexican regions relative to the richest region, the Capital, during the period 1940-2009, and the dynamics of the output gap series of the U.S.-Mexico border region. Our estimations suggest that whilst other Mexican regions have been catching up with the Capital region, the Mexican border region has lagged behind its U.S. counterpart. Moreover, we find evidence that the economic liberalization reforms of the 1980s negatively affected the output gap of most regions, without reverting the catching-up process. The border region is a notable exception, where the reforms actually accelerated the catching-up process.