Using night time lights to find regional inequality in India and its relationship with economic development

Abstract

Due to unavailability of consistent income data at the sub-state or district level in developing countries, it is difficult to generate consistent and reliable economic inequality estimates at the disaggregated level. To address this issue, this paper employs the association between night time lights and economic activities for India at the sub-state or district-level, and calculates regional income inequality using Gini coefficients. Additionally, we estimate the relationship between night time lights and socio-economic development for regions in India. We employ a newly available data on regional socio-economic development (Social Progress Index), as well as an index that represents institutional quality or governance. Robust to the choice of socio-economic development indicators, our findings indicate that regional inequality measured by night time lights follow the Kuznets curve pattern. This implies that starting from low levels of socio-economic development or quality of institutions, inequality rises as regional socio-economic factors or quality of institutions improve, and with subsequent progress in socio-economic factors or quality of institutions, regional inequality declines.