Spatial distribution of economic complexity in the municipalities of São Paulo and Minas Gerais: does proximity matter?

ABSTRACT  This paper analyzes the hypothesis of spatial improvement of the activities and products complexity in the municipalities of São Paulo and Minas Gerais. It is assumed that the proximity to more complex regions trigger positive spillovers, resulting from the acquisition and accumulation of non-tradeable capabilities, especially in regions with greater productive diversity (metropolitan and more dynamics regions), so that closer regions can be the main beneficiaries of the spatial diffusion process. The methodology involves measuring the Economic Complexity Indicator (ECI) for the municipalities of São Paulo and Minas Gerais; the local Moran’s I and the Local Indicator of Spatial Association (LISA); and spatial regressions based on Global Scope Spatial Dependency Models (MEAG), based on data from 2019. The results suggest i) the existence of a positive spatial association pattern; ii) the dissemination and agglomeration of complexity depends on the type of activity and product predominant in the productive structure, so the clusters of the municipalities of São Paulo are more concentrated and have more robust connections, while in Minas Gerais the clusters are more dispersed; iii) the sophistication of the activities is significantly influenced by neighborhood relations, especially from locations regarded as “sophistication epicenters”, signaling a circular causality scenario both in the prosperity and in the “quiescence trap” incidence.

KEYWORDS:
Economic complexity; Regional development; Spatial dependence; São Paulo; Minas Gerais