Research outcomes

Regional unemployment dynamics in Indonesia: Serial persistence, spatial dependence, and common factors

Sunday, Nov 26, 2023 by Carlos Mendez and Tifani Siregar Regional Unemployment, Cyclical Sensitivity, Spatial Dependence, Common factors, Indonesia

We analyze the space-time dynamics of Indonesia’s provincial unemployment by simultaneously accounting for their serial persistence, spatial dependence, and common factors. The results show that unemployment rates vary widely across provinces, but have similar patterns over time, indicating the presence of common latent factors. Using the average national unemployment rate as a proxy for common factors, the results indicate that the space-time dynamics of provincial unemployment are characterized by both significant serial persistence and spatial dependence.

Regional Okun’s law and endogeneity: evidence from the Indonesian districts

Monday, Oct 16, 2023 by Harry Aginta, Carlos Mendez and Masakazu Someya Regional Labor Market, Okun’s Law, Causal Inference, Instrumental Variable, Indonesia

This paper investigates the regional Okun’s law across 514 districts of Indonesia over the 2011–2020 period. To handle the endogeneity issue, we apply a two-stage least squares (2SLS) model and use regional temperature as instrument for economic growth. Our results show that the Okun’s coefficient becomes statistically significant only after endogeneity is addressed. Consistent with the prevalent economic divide between the western and eastern regions of Indonesia, we find that Okun’s law applies solely to the more industrialized western regions.

Convergence clubs and spatial structural change in the European Union

Wednesday, Aug 16, 2023 by Eleonora Cutrini and Carlos Mendez Spatial Dependence, Structural Change, Spatial Econometrics, Exploratory Spatial Data Analysis

This article studies regional income convergence and its conditioning factors in 267 subnational regions of the European Union during the 2003–2016 period. Building on previous research that documents the formation of multiple convergence clubs in per-capita income, we study the role of structural change and spatial dependence as key conditioning factors of the club convergence process. Our results are threefold. First, we document that the spatial distribution of the convergence clubs shows a strong degree of spatial dependence.

Investigating regional income convergence in China: an exploratory spatio-temporal perspective

Tuesday, Apr 18, 2023 by Yilin Chen, Dohèto Othniel Kpoviessi and Harry Aginta Income convergence, Exploratory Spatial Data Analysis, Investment, Human Capital, China

Uneven regional development has become an issue in China since the Open and Reform Policy in the 1980s. The imbalance can be observed as the “coastal-west divide” in previous convergence studies. This paper aims to investigate the convergence of income and its determinants across Chinese provinces from 1999 to 2017 by including the role of space. Our findings from a new exploratory technique in spatial analysis show convergence in income and investment but not in human capital, which is in line with results from non-spatial classical convergence models.

Regional income convergence and conditioning factors in Turkey: Revisiting the role of spatial dependence and neighbor effects

Sunday, Aug 7, 2022 by Ugur Ursavas and Carlos Mendez Spatial Dependence, Structural Change, Spatial Econometrics, Exploratory Spatial Data Analysis, Club Convergence, Turkey

This paper studies regional income convergence and its conditioning factors across 81 provinces of Turkey over the 2007–2019 period. Through the lens of a nonlinear dynamic factor model, we first test the hypothesis that all provinces would eventually converge to a common long-run equilibrium. We reject this hypothesis and find that the provincial dynamics of income per capita are characterized by 6 convergence clubs. Next, we evaluate the conditioning factors behind club formation.

Schooling ain’t learning in Europe: A club convergence perspective

Tuesday, Jun 21, 2022 by Linda Glawe and Carlos Mendez. Comparative Economic Studies

Convergence in human capital is a key precondition to achieve income convergence in the European Union; however, so far research on this topic has nearly been absent. Our paper contributes to the literature by investigating the human capital convergence dynamics within the EU over the period 1990–2016 using a nonlinear dynamic factor model. While we find evidence of absolute convergence with respect to the average years of schooling, we identify four convergence clubs with respect to learning outcomes, and the divergence across those four clubs is increasing over time.

Social and economic convergence across districts in Indonesia: A spatial econometric approach

Friday, Apr 29, 2022 by Cani Miranti and Carlos Mendez Regional Inequality, Spatial Dependence, Spatial Econometrics, Convergence, Indonesia

This paper evaluates social and economic convergence across 514 districts in Indonesia over the 2010-2018 period. By applying spatial panel-data methods, this paper re-examines the regional convergence hypothesis using a novel dataset on the human development index (HDI) and GDP per capita. These two indicators are used as proxies for social and economic progress, respectively. Results show a significant neighborhood effect on the convergence process in both indicators. Specifically, the performance of regional neighbors tends to accelerate the convergence speed of both HDI and GDP per capita.

Regional convergence and spatial dependence in Thailand: Global and local assessments

Thursday, Mar 3, 2022 by Katikar Tipayalai and Carlos Mendez Regional Inequality, Spatial Dependence, Spatial Heterogeneity, Convergence, Club Convergence, Thailand

This article studies the evolution of per-capita income disparities and spatial dependence across 77 provinces of Thailand over the period 1995–2017. Results show that – on average – regional income disparities are decreasing over time and initially poor provinces are catching up with rich provinces, indicating the presence of sigma and beta convergence. However, when we study the evolution of disparities – beyond the average – we reject the hypothesis that all provinces would eventually converge to a common long-run equilibrium.

Economic and social disparities across subnational regions of South America: A spatial convergence approach

Tuesday, Jan 4, 2022 by Carlos Mendez and Felipe Santos. Comparative Economic Studies

This paper studies the evolution of economic and social disparities across South America. By exploiting a novel multi-country subnational dataset, we evaluate the evolution of gross national income per capita (GNI) and the human development index (HDI) across 151 subnational regions over the 1990-2018 period. In particular , regional dynamics are evaluated through the lens of two spatial convergence models. The first model deals with the role of spatial dependence. Results indicate that for both GNI and HDI, there is an overall process of regional convergence.

Sectoral productivity convergence, input-output structure and network communities in Japan

Wednesday, Dec 15, 2021 by Alvaro Dominguez, Felipe Santos and Carlos Mendez Productivity, Convergence, Input-Output, Networks, Japan

We study sectoral productivity convergence through the input-output structure of the economy and its network representation. In particular, we study 106 production sectors in Japan over the 2003-2012 period and identify highly interconnected sectors using community detection algorithms. We next characterize the dynamics of these communities by evaluating the evolution of productivity dispersion using parametric and nonparametric frameworks of sectoral productivity convergence. We find two dominant communities: The central members of community 1 are mostly service-related industries, while the central members of community 2 are mostly high-tech manufacturing industries.

Provincial income convergence clubs in Indonesia: Identification and conditioning factors

Sunday, Aug 15, 2021 by Anang Gunawan, Carlos Mendez and Shigeru Otsubo Club Convergence, Logit Model, Industrialization, Indonesia

The discussion on regional income per capita convergence in Indonesia continues with an emphasis on whether regional per capita incomes tend to converge or diverge over the long run. This study evaluates the regional convergence hypothesis at the provincial level during the recent deindustrialization period 2001–2017 of Indonesia. First, the study examines the existence of convergence clubs in Indonesia using a recently assembled panel dataset. Results reveal four convergence clubs with particularly large income gaps, mostly arising from the top of the income distribution.

Spatial Beta-Convergence Forecasting Models: Evidence from Municipal Homicide Rates in Colombia

Sunday, Aug 15, 2021 by Felipe Santos-Marquez beta convergence, colombia, crime forecasting, spatial effects,

Homicide rates are forecasted for 1120 inland municipalities in Colombia. Using data from 2003 to 2018, five different forecasting methods are used: ETS, ARIMA, STAR, a classical beta convergence based model and a spatial beta convergence model. Time series cross validation for 4-year ahead forecasts is implemented to assess the accuracy of all models. It is found that the STAR and the beta models have the lowest root mean squared errors.

Human Capital Constraints, Spatial Dependence, and Regionalization in Bolivia: A Spatial Clustering Approach

Tuesday, Mar 16, 2021 by Carlos Mendez and Erick Gonzales Human Capital, Spatial Dependence, Regionalization, Clusters, Principal Components, Spatial Clusters, Bolivia

Using a novel municipal-level dataset and spatial clustering methods, this article studies the distribution of human capital constraints across 339 municipalities in Bolivia. In particular, the spatial distribution of five human capital constraints are evaluated: chronic malnutrition in children, non-Spanish speaking population, secondary dropout rate of males, secondary dropout rates of females, and the inequality of years of education. Through the lens of both spatial dependence and regionalization frameworks, the municipalities of Bolivia are endogenously classified according to both their level of human capital constraints and their locational similarity.

Regional Income Disparities and Convergence Clubs in Indonesia: New District-Level Evidence

Monday, Jan 11, 2021 by Harry Aginta, Anang Gunawan, Carlos Mendez Club Convergence, Indonesia, Regional Inequality, Income Per Capita

This paper aims to re-examine the regional convergence hypothesis on income in Indonesia over the 2000-2017 period. By applying a non-linear dynamic factor model, this paper tests the club convergence hypothesis using a novel dataset of income at the district level. The results show significant five convergence clubs in Indonesian districts’ income dynamics, implying the persistence of income disparity problems across districts even after implementing the decentralization policy. The subsequent analysis reveals two appealing features regarding the convergence clubs.

Regional Income Disparities, Distributional Convergence, and Spatial Effects:District-Level Evidence from Indonesia 2000-2017

Monday, Jan 11, 2021 by Carlos Mendez, Anang Budi Gunawan, and Felipe Santos-Marquez Distributional Convergence, Getis Filter, Spatial Filter, Distribution Dynamics, Club Convergence, Indonesia, Regional Inequality

Using a novel dataset constructed for this study, the spatio temporal dynamics of income per capita across 34 provinces and 514 districts in Indonesia over the 2010-2017 period are analyzed. First, an exploratory spatial analysis suggests that spatial autocorrelation is only significant at the district level, and it appears to be robust from 2013 to 2017. Consequently, at this level, a spatial filtering model is used for decomposing income into a spatially independent component and a spatial residual.

Convergence Clubs in Labor Productivity and its Proximate Sources: Evidence from Developed and Developing Countries

Wednesday, Nov 11, 2020 by Carlos Mendez Springer Publisher

Testing for economic convergence across countries has been a central issue in the literature of economic growth and development. This book introduces a modern framework to study the cross-country convergence dynamics of labor productivity and its proximate sources: capital accumulation and aggregate efficiency. In particular, recent convergence dynamics of developed as well as developing countries are evaluated through the lens of a non-linear dynamic factor model and a clustering algorithm for panel data.

Regional Convergence, Spatial Scale, and Spatial Dependence: Evidence from Homicides and Personal Injuries in Colombia 2010-2018

Saturday, Nov 7, 2020 by Felipe Santos-Marquez and Carlos Mendez. Regional Science Policy and Practice

This paper studies regional convergence and spatial dependence of homicides and personal injuries in Colombia. In particular, through the lens of both classical and distributional convergence frameworks, two spatial scales are contrasted: municipalities and states. For both homicides and personal injuries, sigma convergence is only found at the state level. In contrast, beta convergence is found at both state and municipal level. The non‐parametric convergence framework highlights further contrasting patterns. For homicides at the state level, four convergence clusters are found, while two clusters are present at the municipal level.

Does the law of one price hold in 82 Indonesian cities? Evidence from a club convergence approach

Saturday, Nov 7, 2020 by Harry Aginta Economics Bulletin

This study re-examines regional price convergence across 82 cities in Indonesia. We implement club convergence analysis developed by Phillips and Sul (2007, 2009) on monthly aggregate consumer price data and its components from January 2014 to December 2019. We do not find evidence of overall convergence in aggregate consumer price data. Instead, we identify four club convergence. Using disaggregated data, four new outcomes arise; first, none of the consumer price components show overall convergence but multiple club convergence do exist, second, there is variability in the number and composition of clubs among consumer price components, third, the price of foodstuffs and education-related commodities in most cities converge to the higher level, and fourth, the formation of club convergence in aggregate price is attributed largely by housing, processed foods, transport, and health components.

Spatial dynamics of consumer price in Indonesia: Convergence clubs and conditioning factors

Saturday, Nov 7, 2020 by Harry Aginta Asia-Pacific Journal of Regional Science

This paper aims to identify convergence clubs in regional price across 34 provinces in Indonesia and investigate conditioning factors of club formation. We analyze regional monthly consumer price data from January 2012 to December 2019 with a novel club convergence test developed by Phillips and Sul (Econometerica 756:1771–1855, 2007), and show that regional consumer price does not converge into a single universal equilibrium. Instead, there are four convergence clubs identified. Further investigation shows that labor productivity, inflation expectation, consumption growth, and spatial externalities influence the convergence club formation.

Human Development Disparities and Convergence across Districts of Indonesia: A Spatial Econometric Approach

Sunday, Nov 1, 2020 by Cani Miranti and Carlos Mendez Working paper

Using a novel district-level dataset of the human development index, this paper studies the evolution of regional disparities in Indonesia over the 2010-2018 period. In particular, the paper evaluates the role of spatial dependence on the speed of regional convergence. The main findings are three-fold. First, regional disparities have been decreasing in the overall index of human development as well as in most of its components. Second, there are considerable differences in the speed of convergence in the components of the human development index.

Disparities in Regional Productivity, Capital Accumulation, and Efficiency across Indonesia: A Club Convergence Approach

Friday, Oct 2, 2020 by Carlos Mendez and Mitsuhiko Kataoka Review of Development Economics

This paper studies the evolution of regional disparities in labor productivity, capital accumulation, and efficiency across Indonesian provinces over the 1990-2010 period. Through the lens of a non-linear dynamic factor model, we first test the hypothesis that all provinces would eventually converge to a common steady-state path. We reject this hypothesis and find that the provincial dynamics of labor productivity are characterized by two convergence clubs. We next evaluate the dynamics of the proximate determinants of labor productivity and find some mixed results.

Regional Convergence and Spatial Dependence across Subnational Regions of ASEAN: Evidence from Satellite Nighttime Light Data

Thursday, Aug 27, 2020 by Carlos Mendez and Felipe Santos Regional Science Policy and Practice

Satellite nighttime light data are increasingly used for evaluating the performance of economies in which official statics are non-existent, limited, or non-comparable. In this paper, we use a novel luminosity-based measure of GDP per capita to study regional convergence and spatial dependence across 274 subnational regions of the Association of South East Asian Nations (ASEAN) over the 1998-2012 period. Specifically, we first evaluate the usefulness of this new luminosity indicator in the context of ASEAN regions.

Regional Efficiency Convergence and Efficiency Clusters: Evidence from the Provinces of Indonesia 1990–2010

Monday, Jan 27, 2020 by Carlos Mendez Asia-Pacific Journal of Regional Science

Improving production efficiency at the regional level is often considered a means to reduce regional inequality. This article studies regional efficiency convergence across provinces in Indonesia over the 1990–2010 period. Through the lens of both classical and distributional convergence frameworks, the dispersion dynamics of the following three indicators are contrasted: overall efficiency, pure efficiency, and scale efficiency. Results from the classical convergence approach suggest that—on average—there is regional convergence in all these three efficiency measures.

Productivity Differences and Convergence Clubs in Latin America

Saturday, Nov 16, 2019 by Carlos Mendez convergence

By Carlos Mendez ABSTRACT There is a growing literature that highlights that the development potential of Latin America is highly constrained by its low productivity. In this context, this paper evaluates the productivity differences across 20 Latin American countries over the 1980-2014 period. Through the lens of a non-linear dynamic factor model, this paper finds that the productivity dynamics of Latin America appear to be characterized by a lack of overall convergence and the formation of multiple local convergence clubs.

Lack of Global Convergence and the Formation of Multiple Welfare Clubs across Countries: An Unsupervised Machine Learning Approach

Thursday, Oct 10, 2019 by Carlos Mendez Economies

The cross-country convergence hypothesis is one of the central topics of long-run macroeconomics. This paper revisits this hypothesis in a context beyond GDP. It uses a novel welfare index that incorporates measures of consumption, leisure, life expectancy, and inequality. Based on a sample of 128 countries over the 1980–2007 period, the lack of global sigma and beta convergence is first documented. Next, the paper incorporates some recent developments from the unsupervised machine learning literature to evaluate the existence of local convergence.

Research outcomes

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