Lights out: The economic impacts of Covid‐19 on cities globally

Abstract

AbstractThis paper uses high‐frequency nighttime lights data and a variety of empirical methods to analyze the impacts of the Covid‐19 crisis on economic activity during the period January 2020–March 2021 for a global sample of 2841 cities. Particular attention is paid to the role of a city's population density in shaping these impacts. While economic activity in cities is found to be negatively affected by both the spread of the virus and the imposition of nonpharmaceutical interventions, population density is found to amplify the negative impacts of the spread of the virus and attenuate those of nonpharmaceutical interventions. These results are driven by cities in low‐ and middle‐income countries, where overall economic activity is found to have been more strongly hit by the pandemic and the strength of those impacts was stronger for less densely populated cities. The role of population density in shaping the economic impacts of the Covid‐19 crisis across cities is confirmed by an event‐study analysis. Taken together, the findings suggest that the Covid‐19 crisis gave rise to divergent urban economic trajectories, both between high‐ and lower‐income countries and between cities with different population densities in lower‐income countries.