Electronic copy available at: https://ssrn.com/abstract=3132941 EXOGENOUS OR ENDOGENOUS ECONOMIC GROWTH: A MEXICAN STATES CONVERGENCE RESEARCH MARIO CAMBEROS C. Center for Research in Food and Development A.C. Hermosillo, Sonora. México mcamberos@ciad.mx JOAQUIN BRACAMONTES N. Center for Research in Food and Development A.C. Hermosillo, Sonora. México joaco@ciad.mx Abstract: 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. Keywords: CONVERGENCE, HUMAN CAPITAL, REGIONAL ECONOMICS 1. INTRODUCTION Answer what forces guide economic growth towards a steady state? developed a fruitful debate that has prevailed for the last three decades. In this framework Lucas (1988) propose Convergence hypothesis and introduce in the Cobb-Douglas function production, human capital, as the most important factor toward convergence economic growth. Then Barro and Sala-i-Martin Model echoes questioned whether poor countries or regions tend to grow faster than rich ones. Are there automatic forces that lead to convergence over time in the levels of per capita income and product? (Barro and Sala-i-Martin 1992). Decomposition is possible in 2 parts: the first one known as the absolute convergence hypothesis or beta convergence (β); the second part is related with conditional convergence. Both Lucas, and Barro and Sala-i- Martin insight is related to the foundation of the Endogenous Economic Growth Modern Theory. All models are mainly based on Cobb-Douglas function; econometric methods such as ordinary least squares (OLS) cross-section and panel data are used to measure convergence, which will be described in the methodology section and when doing its application. Barro and Sala-i-Martin (1992) estimates found absolute convergence for the 1880-1988 period, β=