Measuring global economic activity using air pollution

Crawford School of Public Policy
Image of a city covered in smog

Event details

ACDE Seminar

Date & time

Tuesday 09 April 2024
11.00am–12.30pm

Venue

ANU Online Zoom

Speaker

Martin Rama, the former World Bank Chief Economist for the South Asia region

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

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