The aim of this research is to analyze the impact of the education level of the labor force, the accumulation of intellectual capital, the capacity for innovation, and the transfer of knowledge on the economic activity of Mexico’s federal entities. To achieve this goal, various specifications for a panel model were calculated that take into account the spatial correlation patterns of economic activity and the unobservable claims of neighboring entities’ production functions. The results suggest that by decreasing the proportion of workers with lower education levels, increasing the accumulation of intellectual capital, and intensifying the exchange of goods and services abroad, the production level increases.