Abstract
Regional interaction is generally understood as implying movement between regions at the same level of an hierarchy. This paper extends the notion to include an hierarchical system, thus facilitating the consideration of vertical interaction in the analysis of regional interaction. Obviously, vertical interaction is not altogether a new concept. One could find this concept in many analyses related to national-local or federal-state relationships. This paper treats hierarchy in a strict sense; spatial units are interacting one with another within, but not between, presumed super regions. A particular example drawn in this paper is the province-region relationships for the case of Indonesia. In this framework, provinces form a region, and regions form the nation. The Dendrinos–Sonis model is then used as the basis for measuring the hierarchical spatial interaction in Indonesia. The analysis will explore the degree to which complementarity and competitive interaction revealed at one level in the hierarchy persist at lower or higher levels.
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Notes
This way of understanding regional interaction is different from those defining regional interaction that is agent-based. An example of agent-based definition of regional interaction is provided in Poot (2000, 205) where he defines regional competition, which is one type of interactions, as actions of economic agents that are taken to enhance the standard of living of their own territories, such as regions, cities, or countries.
The term product and income should have different meaning at the regional level. However, we ignore such distinction in this paper. Hence, the two terms will be used interchangeably.
SUR technique on Eq. 4 will yield the same estimates as those obtained with the ordinary least square (OLS) estimator. The reason is simply the fact that each of n - 1 equation in Eq. 4 has exactly the same set of explanatory variables (Judge et al. 1988). The use of SUR here is justified by its greater efficiency than OLS.
For further exposition on the spatial econometrics technique involving the use of spatial weight matrix, look at Anselin (1988).
That fact raises another issue to address, which is beyond the scope of this paper, i.e., the appropriateness of the spatial categorization. This question carries many different concerns, among them are the appropriate level of structure for the analysis, should vertically hierarchical structure be defined in accordance with the term nodal or functional regions or administrative regions, etc.
This is the old 27-province system minus East Timor, who became an independent country in 1999.
There are several other regionalizations that are common, for instance, 'Java' and 'outer islands'. Another commonly used regionalization is the 'western' and 'eastern' parts of Indonesia. The former refers to Java and Sumatra (and sometimes also includes Bali), and the latter is the rest of the country.
Some other studies have also confirmed the existence of regional convergence within a country, e.g., Barro and Sala-i-Martin (1995) for the case of US states and Japanese prefectures. For the case of developing countries look at Cashin and Sahay (1996) for the convergence among 20 states in India. From the theoretical point of view, the convergence among sub-nations is sparked by the relatively homogenous conditions of exogenous variables. In terms of the Solow growth model, the exogenous variables may be the saving rates, population or labor supply growth, depreciation, or rate of technical progress.
We use the provincial numbering system to make table reading easier. Note that this numbering system is different from one officially used by the Central Bureau of Statistics.
Note again that it is assumed that provinces of different regions do not interact directly. Recall the strictly hierarchical structure as presented in Fig. 1.
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Nazara, S., Hewings, G.J. & Sonis, M. An exploratory analysis of hierarchical spatial interaction: the case of regional income shares in Indonesia. J Geograph Syst 8, 253–268 (2006). https://doi.org/10.1007/s10109-005-0016-3
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DOI: https://doi.org/10.1007/s10109-005-0016-3