Measuring Economic Growth from Outer Space

[tyler_cowen]

Originally posted on August 5, 2009.

Here is a clever new idea from Henderson, Storeygard, and Weil:

GDP growth is often measured poorly for countries and rarely measured at all for cities. We propose a readily available proxy: satellite data on lights at night. Our statistical framework uses light growth to supplement existing income growth measures. The framework is applied to countries with the lowest quality income data, resulting in estimates of growth that differ substantially from established estimates. We then consider a longstanding debate: do increases in local agricultural productivity increase city incomes? For African cities, we find that exogenous agricultural productivity shocks (high rainfall years) have substantial effects on local urban economic activity.

WSJ blogs added:

They also noted how data from night lights can be focused to provide data on a local level. In Southern Madagascar large deposits of rubies and sapphires were discovered in late 1998 near the towns of Ilakaka and Sakaraha, leading to an economic boom. But the data from the satellites tell the story of where the benefits were felt most deeply. “Over the next five years there was a sharp growth in the number of pixels for which light is visible at all, and in the intensity of light per pixel,” the economists said. “The other town visible in the figure, Ihosy, shows no such growth. If anything, Ihosy’s light gets smaller and weaker, as it suffers in the competition across local cities for population.”