Territorial Convergence in Ecuador: The Role of Economic Sectors and Spatial Spillovers Rodrigo Mendieta Muñoz1, Nicola Pontarollo2 October, 2015 Abstract The paper analyses the subnational convergence process of Ecuador during the period 2007-2013 through a spatial panel econometric technique. The advantage of this technique is to provide a reliable estimation because it takes into account the spatial interaction in the territory. Ecuador is characterised by severe cantonal disparities, reflected in a heterogeneous economic and social geography that can undermine a balanced development and a positive spatial multiplier effect within the country. In this extent we measure the sectoral effects on economic growth proving that, despite the change of productive matrix pushed by the government, this process if far to be completed. In particular the country is too much focussed into low productive sectors which depress economic growth and the manufacture sector is too much concentrated in few areas, preventing its possible positive effect into the whole economy. Keywords: Subnational convergence, Panel Spatial Econometrics, Economic Sectors 1 Facultad de Ciencias Económicas y Administrativas and Grupo de Investigación en Economía Regional, University of Cuenca, Ecuador:
[email protected] 2 Department of Economics, University of Verona, Italy, and Grupo de Investigación en Economía Regional, University of Cuenca, Ecuador. Email:
[email protected] 1 1. Introduction Ecuador has been characterized by persisting severe cantonal disparities, reflected in a heterogeneous economic and social geography, which accounts for cantons with asymmetric characteristics in terms of productivity and competitiveness, as well as in terms of differentiated population and social dynamics (Mendieta, 2015a; Ramón-Mendieta et al., 2013; Alvarado, 2011).