Regional convergence and direct foreign investment in Mexico in the context of NAFTA, 1994-2002

The aim of this article is to prove the hypothesis of absolute and conditional convergence of private (per capita) income for the 32 states of the Mexican Republic, using the econometric technique of panel data. On the basis of iterative Bayesian estimates we demonstrate that, contrary to the standard empirical results, Mexican states do not converge at the same velocity. Besides, the distribution of the absolute convergence velocity allows us to show, in terms of the dynamics of development, the analogies which may exist among some states and the heterogeneity which may exist among others. Thus, we are able to group those states into homogeneous regions in terms of their respective convergence rates.