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Measuring Global Economic Activity Using Air Pollution

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  • Ezran,Irene Anne Sophie
  • Morris,Stephen David
  • Rama,Martin G.
  • Riera-Crichton,Daniel

Abstract

This paper uses satellite readings of nitrogen (NO2) air pollution, a byproduct of combustion, toimprove the measurement of global economic activity. The proposed approach improves upon night light measures forcountries where data manipulation, conflict, or other factors have led to poor national accounts. The paper alsoshows that existing country rankings of gross domestic product accuracy over the past 15 years are unreliable, evenamong advanced economies. For example, the paper shows that during COVID, in France, the UK and Spain gross domesticproduct in 2020 was underreported by 76, 181, and 205 basis points respectively. The methodological contribution extendsprevious Error-Measurement frameworks which, suffer from error-in-variables biases, with an objective, data-drivenidentification strategy exploiting the plausibly orthogonal measurement errors between nitrogen dioxide and nightlights, which are measured at different times.

Suggested Citation

  • Ezran,Irene Anne Sophie & Morris,Stephen David & Rama,Martin G. & Riera-Crichton,Daniel, 2023. "Measuring Global Economic Activity Using Air Pollution," Policy Research Working Paper Series 10445, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10445
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    File URL: http://documents.worldbank.org/curated/en/099546505162383426/pdf/IDU03a2cb8d308c9604c570a94c0696b3844d56a.pdf
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