Bluhm, R., & McCord, G. C. (2022). What Can We Learn from Nighttime Lights for Small Geographies? Measurement Errors and Heterogeneous Elasticities. Remote Sensing
(5), Article 5. https://doi.org/10.3390/rs14051190
ZusammenfassungNighttime lights are routinely used as a proxy for economic activity when official statistics are unavailable and are increasingly applied to study the effects of shocks or policy interventions at small geographic scales. The implicit assumption is that the ability of nighttime lights to pick up changes in GDP does not depend on local characteristics of the region under investigation or the scale of aggregation. This study uses panel data on regional GDP growth from six countries, and nighttime lights from the Defense Meteorological Satellite Program (DMSP) to investigate potential nonlinearities and measurement errors in the light production function. Our results for high statistical capacity countries (the United States and Germany) show that nightlights are significantly less responsive to changes in GDP at higher baseline level of GDP, higher population densities, and for agricultural GDP. We provide evidence that these nonlinearities are too large to be caused by differences in measurement errors across regions. We find similar but noisier relationships in other high-income countries (Italy and Spain) and emerging economies (Brazil and China). We also present results for different aggregation schemes and find that the overall relationship, including the nonlinearity, is stable across regions of different shapes and sizes but becomes noisier when regions become few and large. These findings have important implications for studies using nighttime lights to evaluate the economic effects of shocks or policy interventions. On average, nighttime lights pick up changes in GDP across many different levels of aggregation, down to relatively small geographies. However, the nonlinearity we document in this paper implies that some studies may fail to detect policy-relevant effects in places where lights react little to changes in economic activity or they may mistakenly attribute this heterogeneity to the treatment effect of their independent variable of interest.
Bluhm, R., Polonik, P., Hemes, K. S., Sanford, L. C., Benz, S. A., Levy, M. C., Ricke, K. L., & Burney, J. A. (2022). Disparate air pollution reductions during California’s COVID-19 economic shutdown. Nature Sustainability
(6), 509–517. https://doi.org/10.1038/s41893-022-00856-1
ZusammenfassungMinority communities in the United States often experience higher-than-average exposures to air pollution. However, the relative contribution of institutional biases to these disparities can be difficult to disentangle from other factors. Here, we use the economic shutdown associated with the 2020 COVID-19 shelter-in-place orders to causally estimate pollution exposure disparities caused by the in-person economy in California. Using public and citizen-science ground-based monitor networks for respirable particulate matter, along with satellite records of nitrogen dioxide, we show that sheltering in place produced disproportionate air pollution reductions for non-White (especially Hispanic and Asian) and low-income communities. We demonstrate that these racial and ethnic effects cannot be explained by weather patterns, geography, income or local economic activity as measured by local changes in mobility. They are instead driven by regional economic activity, which produces local harms for diffuse economic benefits. This study thus provides indirect, yet substantial, evidence of systemic racial and ethnic bias in the generation and control of pollution from the portion of the economy most impacted in the early pandemic period.
ZusammenfassungTracking the development of cities in emerging economies is difficult with conventional data. This paper shows that nighttime lights can be used as a reliable proxy for economic activity at the city level, provided they are first corrected for top-coding. The commonly-used satellite images of nighttime light intensity fail to capture the true brightness of larger cities. We present a stylized model of urban luminosity and empirical evidence which both suggest that these ‘top lights’ can be characterized by a Pareto distribution or similarly heavy-tailed distributions. We then propose a correction procedure that recovers the full distribution of city lights. Our results show that the brightest cities account for nearly a third of global light output. Applying this approach to cities in Sub-Saharan Africa, we find that primate cities are outgrowing secondary cities. Contrary to the top-coded data, our data show that differences at the intensive margin drive the differential in relative growth rates across city types.
Bluhm, R., Gassebner, M., Langlotz, S., & Schaudt, P. (2021). Fueling conflict? (De)escalation and bilateral aid. Journal of Applied Econometrics
(2), 244–261. https://doi.org/10.1002/jae.2797
ZusammenfassungThis paper studies the effects of bilateral foreign aid on conflict escalation and deescalation. First, we develop a new ordinal measure capturing the two-sided and multifaceted nature of conflict. Second, we propose a dynamic ordered probit estimator that allows for unobserved heterogeneity and corrects for endogeneity. Third, we identify the causal effect of foreign aid on conflict by predicting bilateral aid flows based on electoral outcomes of donor countries which are exogenous to recipients. Receiving bilateral aid raises the chances of escalating from small conflict to armed conflict, but we find little evidence that aid ignites conflict in truly peaceful countries.
Bluhm, R., & Pinkovskiy, M. (2021). The spread of COVID-19 and the BCG vaccine: A natural experiment in reunified Germany. The Econometrics Journal
(3), 353–376. https://doi.org/10.1093/ectj/utab006
ZusammenfassungThe ‘BCG hypothesis' suggests that the Bacillus Calmette-Guérin (BCG) vaccine against tuberculosis limits the severity of COVID-19. We exploit the differential vaccination practices of East Germany and West Germany prior to reunification to test this hypothesis. Using a difference in regression discontinuities (RD-DD) design centred on the end of universal vaccination in the West, we find that differences in COVID-19 severity across cohorts in the East and West are insignificant or have the wrong sign. We document a sharp cross-sectional discontinuity in the severity of the disease, which we attribute to limited mobility across the long-gone border and which disappears when we control for social connectedness. Case and death data after the end of the first lockdown on 26 April does not display a discontinuity at the former border, suggesting that mobility (as opposed to BCG vaccination) played a major role during the initial outbreak.
ZusammenfassungWe analyze the duration of large economic declines and provide a theory of delayed recovery. We show theoretically that uncertain post-recovery incomes lead to a commitment problem which limits the possibility of cooperation in ethnically heterogeneous countries. Strong constraints on the executive solve this problem by reducing the uncertainty associated with cooperative behavior. We test the model using standard data on linguistic heterogeneity and detailed data on ethnic power configurations. Our findings support the central theoretical prediction: countries with more constrained political executives experience shorter economic declines. The effect is large in ethnically heterogeneous countries but virtually non-existent in homogeneous societies. Our main results are robust to a variety of perturbations regarding the estimation method, the estimation sample, measures of heterogeneity, and measures of institutions.
Bluhm, R., de Crombrugghe, D., & Szirmai, A. (2019). Do Weak Institutions Prolong Crises? On the Identification, Characteristics, and Duration of Declines during Economic Slumps. World Bank Economic Review
(3), 810–832. https://doi.org/10.1093/wber/lhz015
ZusammenfassungThis paper studies periods of prolonged contractions in output per capita in a sample of 145 countries from 1950 to 2014. Economic slumps are defined as abrupt interruptions of a period of growth by several regime switches. Slumps start with a sharp contraction along with a trend break, which is followed by another switch when growth stabilizes again. The paper then analyzes the correlates of these slumps, focusing on the length and depth of the contraction, from the beginning of the slump to its trough. The results establish three new stylized facts: (i) weak political institutions predate crises whereas political reforms tend to follow them, (ii) the length and depth of economic declines are robustly correlated with executive constraints and ethnic heterogeneity, and (iii) there is a robust interaction between these two variables, suggesting that institutions constraining leaders are important for stabilizing growth. This is particularly relevant for Sub-Saharan Africa, where politics are often ethnic and decision makers are comparatively unconstrained.
ZusammenfassungThis paper proposes a new framework for poverty accounting, that is, the decomposition of poverty into its proximate components. Using aggregated household surveys from 124 countries, we estimate the potential impacts of income growth and redistribution on poverty rates, as well as their actual contributions to poverty reduction over the period from 1981 to 2010. Our fractional response approach shows that the potential impacts are highly non-linear and differ across regions and time. This non-linearity and variation need to be taken into account if empirical estimates are to inform development policy. Although historically growth has played the main role in poverty reduction, we find that initial inequality is a strong moderator of the impact of growth. In fact, there has been a shift towards pro-poor growth around the turn of the millennium, both at the $2 and at the $1.25 a day poverty line. Nevertheless, our projections of poverty rates until 2030 show that the end of extreme poverty within a generation, as put forth in the Sustainable Development Goals, is unlikely to materialize.
Bluhm, R., de Crombrugghe, D., & Szirmai, A. (2016). The dynamics of stagnation: A panel analysis of the onset and continuation of stagnation. Macroeconomic Dynamics
(8), 2010–2045. https://doi.org/10.1017/S1365100515000231
ZusammenfassungThis paper analyzes periods of economic stagnation in a panel of countries. We test whether stagnation can be predicted by institutional characteristics and political shocks and compare the impacts of such variables with those of traditional macroeconomic variables. We examine the determinants of stagnation episodes using dynamic linear and nonlinear models. In addition, we analyze whether the effects of the included variables on the onset of stagnation differ from their effects on the continuation of stagnation. We find that inflation, negative regime changes, real exchange rate undervaluation, financial openness, and trade openness have significant effects on both the onset and the continuation of stagnation. Only for trade openness is there robust evidence of a differential impact. Open economies have a significantly lower probability of falling into stagnation, but once in stagnation they do not recover faster.