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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.
    • Handle: RePEc:ces:ceswps:_5322
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    More about this item

    Keywords

    regional inequality; spatial inequality; sigma convergence; panel data; luminosity data; economic development; trade; ethnic fractionalization;
    All these keywords.

    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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