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MEASURING ECONOMIC GROWTH FROM OUTER SPACE
J Vernon Henderson1, Adam Storeygard1, David N Weil1
1NATIONAL BUREAU OF ECONOMIC RESEARCH, 1050 Massachusetts Avenue, Cambridge, MA 02138.
The American Economic Review
|July 29, 2014
Summary
Satellite night lights offer a novel proxy for measuring economic growth, especially in data-poor regions. This method improves income growth estimates and enables subnational economic analysis.
Area of Science:
- Economics
- Geospatial Analysis
- Development Studies
Background:
- Accurate measurement of economic growth is challenging, particularly for cities and subnational regions.
- Existing national income accounts often suffer from poor data quality in many countries.
Purpose of the Study:
- To introduce satellite night lights as a proxy for measuring economic growth.
- To develop a statistical framework integrating light growth with existing income data.
- To enable economic growth measurement at subnational levels.
Main Methods:
- Utilizing satellite data on lights at night as a proxy for economic activity.
- Developing a statistical framework to augment national income accounts with light growth data.
- Assuming uncorrelated measurement errors between light data and national income accounts.
Main Results:
- Satellite light growth provides marginal improvements for countries with good data but significantly enhances estimates for data-poor nations.
- Estimates for some low-data countries showed discrepancies of up to 3 percentage points in average annual growth compared to official data.
- Analysis of Sub-Saharan Africa revealed faster growth in non-coastal and non-malarial regions, with no significant difference for primate cities versus hinterlands.
Conclusions:
- Satellite night lights offer a valuable, readily available tool for improving economic growth measurement, especially where traditional data is scarce.
- This methodology expands the scope of empirical growth analysis to subnational regions.
- The findings highlight regional disparities in economic growth within Sub-Saharan Africa.
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