Night lights and regional GDP

Abstract

Based on evidence from national data, Henderson et al. (Am Econ Rev 102(2):994–1028, 2012) suggest that growth of night lights can proxy reliably for growth of regional GDP in low-income countries where GDP data is frequently lacking or of poor quality. Using regional data in two large emerging economies, Brazil and India, this paper finds, however, that the relationship between night lights growth and observed GDP growth varies significantly—in both statistical and economic terms—across regions. The same applies to advanced economies like the United States and Western Europe. The paper accounts for measurement issues with regard to the night lights data and considers several extensions of the empirical model in order to analyze if and under which circumstances the relationship between night lights and GDP growth is stable. Yet parameter instability typically persists, while the stable relationship among urban counties in Brazil represents the major exception.