Spatial Spillovers and Convergence clubs: The Role of Knowledge Diffusion in the Americas

This paper examines how knowledge spillovers shape economic convergence across countries in the Americas between 1950 and 2019. Using spatial econometric models, including a Spatial Dynamic Durbin Model (SDDM) and a Spatial System Generalized Method of Moments (SGMMsys) estimator, that jointly accounts for spatial spillovers, dynamic endogeneity, and cross-sectional heterogeneity within a single framework, we explore how interdependencies in physical and human capital accumulation, as well as population growth, influence per capita income dynamics across borders. Our findings show that spatial effects significantly accelerate the rate of β-convergence, contributing to the emergence of "convergence clubs", clusters of countries with shared development trajectories. The results underscore the importance of regional cooperation, cross-border investment in human capital, and knowledge diffusion as catalysts for inclusive and sustainable development. Policy frameworks that promote spatially integrated strategies can help reduce persistent income disparities in Latin America and foster stronger regional economic integration.