Spatial Dependence and Regional Convergence in Brazil

The majority of the studies on regional convergence ignore the spatial characteristics of the problem. In a recent paper Rey and Montouri (1999) considered the issue of income regional convergence on US under the spatial econometric perspective. The present paper follows the Rey and Montouri’s (1999) approach and introduces some spatial econometric techniques for convergence among Brazilian states. State data over the 1970-95 period is considered. As in the US case, strong patters of spatial correlation are found during the period. The spatial econometric analysis reveals that spatial error dependence seems to be present, and by ignoring it one would cause a model misspecification.