Spatial Spillovers in Regional Economic Inequality: Evidence from Macro Indicators—Remote Sensing in Eastern Indonesia

Abstract

Regional economic inequality remains a persistent challenge in developing economies, particularly in peripheral regions characterized by fragmented geography and uneven development. This study examines spatial spillovers in regional economic inequality by integrating spatial econometric analysis with remote sensing-based indicators. Using district-level data from Eastern Indonesia, the analysis captures how inequality is shaped by spatial interdependence and localized development patterns rather than isolated regional characteristics. Regional economic inequality is measured using a district-level relative Williamson-type index, allowing inequality to vary across space within provincial contexts. To account for spatial dependence, the study employs a spatial econometric framework and evaluates alternative model specifications. In addition to conventional economic indicators, the analysis incorporates satellite-derived measures of economic activity, urbanization, and energy potential to capture spatially observable dimensions of regional development. The results reveal pronounced spatial clustering of regional economic inequality, indicating that disparities are structured by localized spatial interactions. Economic development and spatially distributed urbanization are closely associated with inequality patterns, while the dispersion of economic activity appears to be linked to more balanced regional outcomes. In contrast, natural resource potential alone does not systematically explain spatial inequality, highlighting the importance of complementary institutional and spatial factors. This study contributes to the regional economics literature by demonstrating the value of integrating remote sensing-based indicators into spatial inequality analysis. The findings underscore the need for spatially explicit, place-based development strategies to address persistent regional disparities in peripheral regions of developing economies.