Urban income and city size: Ecological Inference with Entropy Econometrics for the Spanish municipalities

Most of the regional empirical analyses are limited by the lack of data. Researches have to use information which is structured in administrative or political regions not always economically meaningful. Any aggregation of a territory in regions with economic sense requires data of the main economic variables at basic spatial units, like GDP at a local level. In this paper a methodology to approximate local GDP values is proposed using entropy econometrics which can be defined as an exercise of ecological inference. In addition to the analysis of the main characteristics of the techniques proposed, the paper illustrates how the procedure works taking as empirical application the estimation of income for the Spanish municipalities according to their size. As an example of the possibilities open by this methodology a regional classification based on the relevance of the cities size, which allows us to measure the relevance of agglomeration economics, is empirically applied to the Spanish case obtaining some interesting first results.