Nighttime Lights Revisited

The growing availability of free or
inexpensive satellite imagery has inspired many researchers
to investigate the use of earth observation data for
monitoring economic activity around the world. One of the
most popular earth observation data sets is the so-called
nighttime lights from the Defense Meteorological Satellite
Program. Researchers have found positive correlations
between nighttime lights and several economic variables.
These correlations are based on data measured in levels,
with a cross-section of observations within a single time
period across countries or other geographic units. The
findings suggest that nighttime lights could be used as a
proxy for some economic variables, especially in areas or
times where data are weak or unavailable. Yet, logic
suggests that nighttime lights cannot serve as a good proxy
for monitoring the within-in country growth rates all of
these variables. Examples examined this paper include
constant price gross domestic product, non-agricultural
gross domestic product, manufacturing value added, and
capital stocks, as well as electricity consumption, total
population, and urban population. The study finds that the
Defense Meteorological Satellite Program data are quite
noisy and therefore the resulting growth elasticities of
Defense Meteorological Satellite Program nighttime lights
with respect to most of these socioeconomic variables are
low, unstable over time, and generate little explanatory
power. The one exception for which Defense Meteorological
Satellite Program nighttime lights could serve as a proxy is
electricity consumption, measured in 10-year intervals. It
is hoped that improved data from the recently launched Suomi
National Polar-Orbiting Partnership satellite will help
expand or improve these outcomes. Testing this should be an
important next step.