Revisiting the role of secondary towns: How different types of urban growth relate to poverty in Indonesia.

• We relate city and town growth to annual poverty rates for 497 Indonesian districts. • Satellite observations of night-time lights are used to measure urban growth. • Spatial econometric models show an important role for spillovers. • Growth of big city lit area is positively associated with poverty. • Expansion of Indonesia's secondary towns is negatively associated with poverty. There is increasing interest in assessing whether big city growth has effects that differ from the effects of secondary town growth, especially in terms of impacts on poverty. It can be difficult to study these issues with typical sub-national economic data because urban growth often occurs outside the administrative boundaries of cities. An emerging literature therefore uses remote sensing to measure patterns of urban growth without being restricted by limitations of data for administrative areas. We add to this literature by combining poverty estimates from annual socio-economic surveys fielded from 2011 to 2019 with remote sensing data on night-time lights for 41 big cities and for secondary towns in 497 Indonesian districts. We measure growth on the extensive (lit area) and intensive (brightness within lit area) margins, and distinguish between growth of big cities and of secondary towns and our spatial econometric models allow global and local spillovers. The extensive margin growth of secondary towns is associated with lower rates of poverty but no similar association holds for big city growth. These patterns corroborate earlier findings from India. Potential productivity advantages of big cities and concerns about agricultural land loss to expanding towns may imply that urban growth patterns that favour big cities are warranted, while on the other hand these new results suggest, from a poverty reduction point of view, that policies to favour secondary towns may be warranted. Policymakers in countries like Indonesia therefore face difficult trade-offs when developing their urbanization strategies. [ABSTRACT FROM AUTHOR]