The Long Run Industrial Growth of Veracruz State, 1955-2008

Growth is examined using a standard two input stochastic production function (SPF) that creates a measure of technical efficiency. Convergence is measured using a convergence equation from the literature but which also included the results from the SPF analysis to incorporate not only initial levels of inputs but also the ability of a municipio to utilize these inputs. A long run database of 149 municipios in Veracruz from 1960 thru 2008 is the sample. A stochastic Cobb-Douglas technology is found to fit the long run growth of Veracruz province well. In the 1960s, 2000s and the long run (1960-2008), weak evidence for the municipios in Veracruz converging with a relatively higher level of technical efficiency resulting in slower growth of industrial labor productivity is found. Some very recent improvement in technical efficiency may be the result of institutional as well as economic reforms finally allowing an exitting of inefficient firms that has kept the levels of municipio industrial technical efficiency stagnant for decades at about 70 percent.