Definition matters. Metropolitan areas and agglomeration economies in a large-developing country

A variety of approaches to delineating metropolitan areas have been developed. Systematic comparisons of these approaches in terms of the metro area landscape that they generate are however few. Our paper aims to fill this gap. We focus on Indonesia and make use of data on commuting flows, spatially fine-grained population, and remotely sensed nighttime lights to construct metropolitan areas using several approaches that have been developed in the literature. We find that the maps and characteristics of Indonesia's metro area landscape generated when using a commuting flow approach differ substantially from those generated using other approaches. Moreover, combining infomation on the metro areas generated by the different approaches with detailed micro-data from Indonesia's national labor force survey, we show that the estimated agglomeration wage premium for Java-Bali tends to fall when using a more restrictive definition of metro areas. This is not the case for the rest of Indonesia, for which we, moreover, find a much lower estimated agglomeration wage premium. We provide an explanation for these findings, and also tentatively probe the factors behind Indonesia's agglomeration wage premium.

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