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Lights and GDP relationship: What does the computer tell us?

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  • Diep Hoang Phan

    (Monash University)

Abstract

The relationship between nighttime lights and GDP varies from country to country. However, which factors drive variations in the lights–GDP relationship across countries remains unclear. This paper examines the significance of approximately 600 potential drivers of uncertainty in the relationship between night lights and GDP worldwide. I employ three novel modern statistical techniques to select variables within a high-dimensional context: LASSO, minimax concave penalty, and spike-and-slab regression. Institutional quality emerges as the most important factor in explaining the difference between luminosity data and GDP across countries.

Suggested Citation

  • Diep Hoang Phan, 2023. "Lights and GDP relationship: What does the computer tell us?," Empirical Economics, Springer, vol. 65(3), pages 1215-1252, September.
    • Handle: RePEc:spr:empeco:v:65:y:2023:i:3:d:10.1007_s00181-023-02377-y
    DOI: 10.1007/s00181-023-02377-y
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    References listed on IDEAS

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    1. Nathan Nunn & Diego Puga, 2012. "Ruggedness: The Blessing of Bad Geography in Africa," The Review of Economics and Statistics, MIT Press, vol. 94(1), pages 20-36, February.
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    More about this item

    Keywords

    Nighttime lights; Modern statistical tools; Official GDP; Measurement errors;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns

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