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

Diep Hoang Phan ()
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Diep Hoang Phan: Monash University

Empirical Economics, 2023, vol. 65, issue 3, No 6, 1215-1252

Abstract: 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.

Keywords: Nighttime lights; Modern statistical tools; Official GDP; Measurement errors (search for similar items in EconPapers)
JEL-codes: E01 O11 O47 R14 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s00181-023-02377-y

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