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Regional Inequality, Convergence, and its Determinants - A View from Outer Space

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  • Christian Leßmann
  • André Seidel

Abstract

This paper provides a new data set of regional income inequalities within countries based on satellite nighttime light data. We first empirically study the relationship between luminosity data and regional incomes for those countries where regional income data are available. We subsequently use our estimation results for an out-ofsample prediction of regional incomes based on the luminosity data, which allows us to investigate regional income differentials in developing countries as well, where official income data are lacking. Based on the predicted incomes, we calculate commonly used measures of regional inequality within countries. Investigating changes in the dispersion of regional incomes over time reveals that approximately 71-80% of all countries face sigma-convergence. Finally, we study different major determinants of the level of regional inequality based on cross-section data. Panel regressions investigate the within-country changes in inequality, i.e., the determinants of the convergence process. We find evidence for an N-shaped relationship between development and regional inequality. Geography, mobility and trade openness are also highly important.

Suggested Citation

  • Christian Leßmann & André Seidel, 2015. "Regional Inequality, Convergence, and its Determinants - A View from Outer Space," CESifo Working Paper Series 5322, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_5322
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    Cited by:

    1. Krause, Melanie & Bluhm, Richard, 2016. "Top Lights - Bright Spots and their Contribution to Economic Development," Annual Conference 2016 (Augsburg): Demographic Change 145773, Verein für Socialpolitik / German Economic Association.
    2. Pfeifer, Gregor & Wahl, Fabian & Marczak, Martyna, 2016. "Illuminating the world cup effect: Night lights evidence from South Africa," Hohenheim Discussion Papers in Business, Economics and Social Sciences 16-2016, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    3. repec:kap:itaxpf:v:24:y:2017:i:2:d:10.1007_s10797-016-9416-1 is not listed on IDEAS
    4. Fan Duan & Bulent Unel, 2017. "Persistence of Cities: Evidence from China," Departmental Working Papers 2017-08, Department of Economics, Louisiana State University.
    5. Steinkraus, Arne, 2016. "Investigating the Carbon Leakage Effect on the Environmental Kuznets Curve Using Luminosity Data," EconStor Preprints 126084, ZBW - German National Library of Economics.
    6. Alfonso Díez-Minguela & Rafael González-Val & Julio Martinez-Galarraga & M. Teresa Sanchis & Daniel A. Tirado, 2017. "The long-term relationship between economic development and regional inequality: South-West Europe, 1860-2010," Working Papers 0119, European Historical Economics Society (EHES).
    7. Rodr�guez-Pose, Andr�s, 2017. "The revenge of the places that don't matter (and what to do about it)," CEPR Discussion Papers 12473, C.E.P.R. Discussion Papers.
    8. Yongzheng Liu & Jorge Martinez-Vazquez & Alfred M. Wu, 2017. "Fiscal decentralization, equalization, and intra-provincial inequality in China," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(2), pages 248-281, April.
    9. Donna Feir & Rob Gillezeau & Maggie Jones, 2017. "Illuminating Economic Development in Indigenous Communities," Department Discussion Papers 1704, Department of Economics, University of Victoria.

    More about this item

    Keywords

    regional inequality; spatial inequality; sigma convergence; panel data; luminosity data; economic development; trade; ethnic fractionalization;

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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