Peter Fisker, University of Copenhagen

"Green Lights: Quantifying the economic impact of drought"

Abstract

This study investigates the effect of drought on economic activity globally using remote sensing data. In particular changes in measures of greenness, such as the Normalized Difference Vegetation Index (NDVI), are correlated with changes in the density of artificial light observed at night on a grid of 0.25 degree latitude-longitude pixels. Measuring drought directly as year-on-year changes in greenness involves concerns about endogeneity since changes in the greenness of an observed pixel are often anthropogenic; deforestation and expansion of urban areas are signs of economic development, but at the same time cause less greenness. To overcome this, I propose the use of lagged variation in monthly rainfall and temperature as instruments for greenness anomalies. Although the analysis is still at a very early stage, preliminary correlations indicate that there is a negative direct relationship between changes in NDVI and lights in the short term, while the IV analysis indicates that non-anthropogenic variation in greenness is positively associated with year-on-year changes in luminosity.