Regional luminosity through the lens of the spatial Solow model: Evidence from Java, Indonesia

Abstract

Luminosity at night is a well-known proxy for measuring local economic activity. This paper studies the space-time dynamics of regional luminosity through the lens a spatial Solow growth model. The model accounts for cross-regional technological interdependence, which is assumed to operate through geospatial externalities. By exploiting new nighttime light images for Java (Indonesia) over the 2013-2020 period, our results show that technological interdependence plays an important role in explaining regional output. Unlike non-spatial models, results from a spatial panel Durbin model reveal that human capital has both direct and indirect (spillover) effects on regional output. Moreover, accounting for technological interdependence yields a greater positive effect of physical capital and a smaller negative effect of labor force growth. Overall, our results highlight the importance of using both nighttime light images and spatial econometrics for understanding regional economic growth.

Carlos Mendez

Associate Professor of Development Economics

My research interests focus on the integration of development economics, spatial data science, and econometrics to understand and inform the process of sustainable development across subnational regions and countries.