On measuring economic growth from outer space: a single country approach

Abstract

This article proposes a simple statistical approach to combine nighttime light data with official national income growth figures. The suggested procedure arises from a signal-plus-noise model for official growth along with a constant elasticity relation between observed night lights and income. The methodology implemented in this paper differs from the approach based on panel data for several countries at once that uses World Bank ratings of income data quality for the countries under study to produce an estimate of true economic growth. The new approach: (a) leads to a relatively simple and robust statistical method based only on time series data pertaining to the country under study and (b) does not require the use of quality ratings of official income statistics. For illustrative purposes, some empirical applications are made for Mexico, China and Chile. The results show that during the period of study there was underestimation of economic growth for both Mexico and Chile, while official figures of China over-estimated true economic growth.