Analyzing the regional economic convergence in Ecuador. Insights from parametric and nonparametric models

Abstract

This paper analyses the process of regional economic convergence in Ecuador from 2007 to 2014, using parametric and non-parametric models. Applying a broad range of methods allows deriving complex empirical findings about the process of convergence, in the context of the high economic heterogeneity that persists over time in the Ecuadorian economy. Encouraging the enlargement of private sector, entering and staying more years in education, increasing the effectiveness of public investment and discouraging the inefficient credit activity are found to be important drivers of economic growth and regional convergence. Additionally, the non-parametric analysis reveals that the progress on the path of regional convergence is mainly due to the 2007-2010 upward transition of the group of poorest provinces. Still, the regional GVA distribution remains polarized and it seems that the group of rich provinces advances faster than the majorities’ one, making the achievement of regional convergence even more difficult in the years to come.