Past studies on the relationship between electricity consumption and temperature have primarily focused on individual countries. Many regions are understudied as a result of data constraint. This paper studies the relationship on a global scale, overcoming the data constraint by using grid-level night light and temperature data. Mostly generated by electricity and recorded by satellites, night light has a strong linear relationship with electricity consumption and is correlated with both its extensive and intensive margins. Using night light as a proxy for electricity consumption at the grid level, we find: (1) there is a U-shaped relationship between electricity consumption and temperature; (2) the critical point of temperature for minimum electricity consumption is around 14.6°C for the world and it is higher in urban and more industrial areas; and (3) the impact of temperature on electricity consumption is persistent. Sub-Saharan African countries, while facing a large electricity deficit already, are particularly vulnerable to climate change: a 1°C increase in temperature is estimated to increase their electricity demand by 6.7% on average.
global scale using grid-level panel data. We focus on annual frequency where identification comes from year-to-year fluctuations in annual average temperature. To overcome the data constraint on electricity consumption, we use nightlight as its proxy. Mostly generated by electricity and recorded by satellites, nightlight is available for the entire world at a granular level and it can be a good proxy for electricity consumption.
Nightlight can be viewed as a normal good with respect to income spent on electricity at annual frequency. In other words, an increase in
II. Literature Review
III. NightLight as a Proxy for Electricity Consumption
A. NightLight, Temperature, and Other Geospatial Data
B. Summary Statistics
C. Relationship with Electricity Consumption
1. Functional relationship
2. Extensive and Intensive Margins
IV. Electricity Consumption and Temperature
A. A U-shaped Relationship
B. Heterogeneous Impact of Temperature
C. Level and Growth Effects
D. Challenging Future for Sub-Saharan Africa
at various stages of development. When we do so, we find that the night-light-based GDP measure often points to faster economic deterioration during conflict than the official data show, but this measure also suggests a stronger bounce-back after the conflict ends. There is good reason to suspect that the ebb and flow of the informal economy plays a role in this postconflict environment.
The usefulness of night lights is not limited to a single indicator in economics. In fact, if we view each pixel of a night-light satellite image as a data point, an individual
This paper presents a novel framework to estimate the elasticity between nighttime lights and quarterly economic activity. The relationship is identified by accounting for varying degrees of measurement errors in nighttime light data across countries. The estimated elasticity is 1.55 for emerging markets and developing economies, ranging from 1.36 to 1.81 across country groups and robust to different model specifications. The paper uses a light-adjusted measure of quarterly economic activity to show that higher levels of development, statistical capacity, and voice and accountability are associated with more precise national accounts data. The elasticity allows quantification of subnational economic impacts. During the COVID-19 pandemic, regions with higher levels of development and population density experienced larger declines in economic activity.
be negative even when GDP growth is moderately positive. This is likely a result of the remaining noise in nighttime lights dwarfing the positive contribution from GDP growth to nighttime light growth.
Nighttime Lights and GDP Summary Statistics at Quarterly Frequency
AEs (33 countries)
Avg. nightly obs.
an economy; counterfactual analysis suggests that conflicts imply a drop in real GDP per capita of 15 to 20 percent over five years compared with a no-conflict scenario.
These country-level findings are corroborated by more granular satellite-based data on night lights at the state level, which show a statistically significant reduction in night-light activity in sub-Saharan Africa during conflicts, thereby indicating a strong local impact of conflicts on economic growth. In addition, state-level data indicate strong spillover effects of conflicts, suggesting
Leandro Medina, Mr. Andrew W Jonelis, and Mehmet Cangul
version, addresses endogeneity concerns for the use of GDP by using satellite data on the nightlight intensity instead of GDP as an indicator variable proxying the size of the economy.
(b) Estimating the size of the informal economy by using a completely independent method, the Predictive Mean Matching method (PMM) by Rubin (1987) . This not only tests the robustness of the modified MIMIC with an alternative econometric technique but also addresses a long and controversial discussion on how to calibrate the relative MIMIC estimates of the informal economy (compare