Decentralization and regional convergence: Evidence from night‐time lights data

The proponents of decentralization argue that it improves economic growth, while critics say it increases regional inequality. The empirical evidence is mixed and based mostly on developed countries due to a lack of income data for lower administrative regions. We combine night‐lights data captured by satellites with a new database on decentralization derived from actual laws that are institutionalized and circumscribed from a global sample of countries. We then analyze the impact of decentralization on regional convergence using income data from the first and second administrative regions. We find that decentralization hinders within‐country regional convergence, especially in the developing countries.