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

55 Pages Posted: 13 Nov 2017

See all articles by Edward L. Glaeser

Edward L. Glaeser

Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER)

Hyunjin Kim

Harvard Business School

Michael Luca

Harvard Business School

Multiple version iconThere are 2 versions of this paper

Date Written: November 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.

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Suggested Citation

Glaeser, Edward L. and Kim, Hyunjin and Luca, Michael, Nowcasting the Local Economy: Using Yelp Data to Measure Economic Activity (November 2017). NBER Working Paper No. w24010. Available at SSRN: https://ssrn.com/abstract=3070034

Edward L. Glaeser (Contact Author)

Harvard University - Department of Economics ( email )

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Hyunjin Kim

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Michael Luca

Harvard Business School ( email )

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