Download this Paper Open PDF in Browser

Nowcasting the Local Economy: Using Yelp Data to Measure Economic Activity

56 Pages Posted: 18 Sep 2017 Last revised: 28 Oct 2017

Edward L. Glaeser

Harvard University - John F. Kennedy School of Government, Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER)

Hyunjin Kim

Harvard Business School

Michael Luca

Harvard Business School - Negotiations, Organizations & Markets Unit

Multiple version iconThere are 2 versions of this paper

Date Written: October 2017

Abstract

Can new data sources from online platforms help to measure local economic activity? Government datasets from agencies such as the U.S. Census Bureau provide the standard measures of local economic activity at the local level. However, these statistics typically appear only after multi-year lags, and the public-facing versions are aggregated to the county or ZIP code level. In contrast, crowdsourced data from online platforms such as Yelp are often contemporaneous and geographically finer than official government statistics. In this paper, we present evidence that Yelp data can complement government surveys by measuring economic activity in close to real time, at a granular level, and at almost any geographic scale. Changes in the number of businesses and restaurants reviewed on Yelp can predict changes in the number of overall establishments and restaurants in County Business Patterns. An algorithm using contemporaneous and lagged Yelp data can explain 29.2 percent of the residual variance after accounting for lagged CBP data, in a testing sample not used to generate the algorithm. The algorithm is more accurate for denser, wealthier, and more educated ZIP codes.

Suggested Citation

Glaeser, Edward L. and Kim, Hyunjin and Luca, Michael, Nowcasting the Local Economy: Using Yelp Data to Measure Economic Activity (October 2017). Harvard Business School NOM Unit Working Paper No. 18-022. Available at SSRN: https://ssrn.com/abstract=3037603

Edward Glaeser

Harvard University - John F. Kennedy School of Government, Department of Economics ( email )

Littauer Center
Room 315A
Cambridge, MA 02138
United States
617-496-2150 (Phone)
617-496-1722 (Fax)

Brookings Institution

1775 Massachusetts Ave. NW
Washington, DC 20036-2188
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Hyunjin Kim

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Michael Luca (Contact Author)

Harvard Business School - Negotiations, Organizations & Markets Unit ( email )

Soldiers Field Road
Boston, MA 02163
United States

HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facId=602417

Paper statistics

Downloads
237
Rank
105,317
Abstract Views
1,211