DP13359 Definition Matters: Metropolitan Areas and Agglomeration Economies in a Large Developing Country

Author(s): Maarten Bosker, Jane Park, Mark Roberts
Publication Date: December 2018
Date Revised: December 2018
Keyword(s): agglomeration economies, Indonesia, metro areas, urban definitions
JEL(s): C21, O18, O47
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13359

A variety of approaches to delineate metropolitan areas have been developed. Systematic comparisons of these approaches in terms of the urban landscape that they generate are however few. This paper aims to fill this gap. The paper focuses on Indonesia and makes use of the availability of data on commuting flows, remotely-sensed nighttime lights, and spatially fine-grained population, to construct metropolitan areas using the different approaches that have been developed in the literature. The analysis finds that the maps and characteristics of Indonesia's urban landscape vary substantially, depending on the approach used. Moreover, combining information on the metro areas generated by the different approaches with detailed micro-data from Indonesia's national labor force survey, the paper shows that the estimated size of the agglomeration wage premium depends nontrivially on the approach used to define metropolitan areas.