Exogenous or Endogenous Economic Growth: A Mexican States Convergence Research

In this paper we study β-convergence absolute and conditional, also σ convergence. Solow´s Model (1956) exogenous development and Lucas' endogenous growth Model (1988) are used as theoretic foundation. To prove convergence hypothesis in Mexico case and the 32 states who conform it, and also to answer the question: Solow or Lucas economic growth explication? An econometric OLS and panel models are taken account. We found the β-convergence and the expected negative sign when annual data series long term is considered in a first regression, but the result is not statistically reliable; if it is estimated for decades periods, second regression, only 1960-1970 show absolute convergence, a third regression including population growth rate and physical capital investment per capita, variables as considered by Solow and estimate including human capital index (HCI), human development index (HDI 2) such as in Lucas model, it confirm no-absolute β-convergence, till outliers were eliminated. When panel heteroskedastic is considerate, convergence is observed, but 48 years path, suggesting includes proxy variables which capture the political effects and explore conditional convergence in a next research. Finally Mexican economic growth Lucas style is proved.