Yelp Data Can Help Measure Local Economic Activity

Measuring and quantifying local economic activity is tough. Traditionally, researchers in the U.S. have used government data to try to understand the forces that impact local community growth or decline. But the data (mainly from the Bureau of Labor Statistics and the Census Bureau) can take years to become available! For example, policymakers might have to wait till 2021 to get the government data they need to understand what’s happening to the San Francisco economy in 2017.  

Now, a new study finds that Yelp data can function as a useful complement to government measures of economic activity. The major difference is that Yelp provides data in close to real time and on a more granular level than other publicly available sources.

This study, coauthored by Professor Edward Glaeser of Harvard University, Hyunjin Kim, a Harvard Business School doctoral candidate, and Professor Michael Luca of Harvard Business School, looks at data from the Census Bureau’s County Business Patterns and compares it to Yelp data.

The researchers found that the number of businesses and restaurants listed on Yelp can meaningfully predict changes in the number of businesses and restaurants that are ultimately reported by the Census Bureau. This process is sometimes referred to as “nowcasting” because you are essentially predicting the present in order to avoid reporting lags. Nowcasting can allow policymakers to explore patterns in the local economy more quickly and on a more detailed level than they’ve ever been able to before. That means we can evaluate the impact of policy decisions much faster, predict problems or successes, and make more educated planning decisions while monitoring the implementation of current plans.

What we hope researchers and academics take away from this study is that there is a vast opportunity available in using Yelp data to understand the economy.

As part of Yelp’s ongoing economic research initiative, we are working closely with Professor Luca (who is leading the academic part of this initiative) and other researchers to provide Yelp data and support for economic analyses, most recently in a research paper on the impact of minimum wage on local business closures. That study and this new one both reiterate three key benefits of using Yelp data:

• Real-time data on Yelp, compared to years-old government data
• Granular view into neighborhoods, cities and streets on Yelp vs. county or zip code only with government data
• More context on Yelp with ratings, reviews, photos, and more from both consumers and businesses

I am leading our internal effort to explore the various ways that Yelp data can improve our understanding of the world around us. Together, we hope to surface insights that add value to policymakers, businesses, and consumers alike.

Hannah Cheesman contributed to this blog post.

Are you a journalist or researcher who’d like to learn more about this data or get your hands on Yelp data of your own? Please contact me at carl@yelp.com.