ESTIMATION OF MUNICIPAL CONVERGENCE CLUBS IN BRAZIL FROM 2000 TO 2010

Abstract

This paper aims to estimate the municipal convergence clubs of Brazil. To
do that, it uses a neoclassical growth model that includes absorption and technological
diffusion. The empirical evidence on the very existence of multiple equilibria (convergence clubs) suggests that there are strong differences among the aggregate production
functions of Brazilian municipalities. To test these hypotheses, we use a finite mixture
methods (FMM) and threshold equation, under the assumption of low consistency of the convergence estimators to a single equilibrium (DURLAUF; JOHNSON, 1995). The
FMM estimates the convergence clubs by the probability distribution of the determinants of economic growth. The Threshold Method identifies the productivity differences of the aggregate production function. The results are consistent with the theory, since
they show multiple balances in municipal convergence clubs and persistence of the inequalities of the income in time. The FMM identifies the economic growth determinants
by club, explaining the elasticities of factor endowments and technological diffusion by
level of economic development. The threshold clubs suggest that the productivity gaps
are due to the differences of the efficiency of capital use and technological absorption.
The greatest effects and significance of the estimated parameters occurred in the most
advanced clubs.