Real growth in space manufacturing output substantially exceeds growth in the overall space economy

Abstract

Accurately measuring real economic output in the space economy is made difficult by the rapid increase in capabilities and decrease in prices of launch and satellite technologies achieved over the past two decades. Nominal measures of output in space will tend to underestimate real growth if customers are paying lower prices for better services over time. In this paper, we use price indexes that apply techniques to the space economy that have been used for decades to adjust nominal measures of output in sectors such as information technology, including matched-model and explicit hedonic quality adjustment. We find that adjusting for price and quality changes in the space economy has substantial effects on estimated growth in economic output, especially across its sectors. Price increases over time in the space information sector, which is dominated by direct-to-home (DTH) satellite television, mean that real growth has been slower than nominal growth since at least 2012, the typical pattern in industries not undergoing rapid technological change. In sharp contrast, rapid price decreases and quality increases in other areas—especially launch and manufacturing of satellite, earth observation, and positioning, navigation, and timing (PNT) equipment—have meant that nominal growth rates substantially understate real growth rates in those industries. Given the central importance of space to our modern economy, having accurate information on growth in the space economy is vital for efficiently allocating the substantial private and public investment being devoted to its development.