Out of this world Macroeconomic Data
Measuring Economic Growth from Outer Space
- Vernon Henderson, Adam Storeygard, and David Weil.
- A recent version of the paper can be found here.
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.
When I’m really board I pick up a copy of the latest AER and scan through for interesting articles. After reading the AER I often fall into a deep sleep coma, but this time it was a bit different. I came across an article that measures economic growth from outer space–how cool is that?
This research piece uses data on light activity at night as measured from satellites to estimate economic activity across the globe. In countries like the US, where we have an established and organized infrastructure to collect and analyze economic data, there is no reason why satellites would come in handy. But what about African villages? War-torn countries? Or civilized countries where the government is in charge of fabricating the numbers (i.e., China)? We can quickly see why the final frontier might actually be the closest method possible to figure out what is going on in the real-world.
In the author’s words:
In the worst case, some countries simply have no national accounts data available at all. For example, Iraq, Myanmar, Somalia, and Liberia are among the countries not included in the most recent (6.2) version of PWT. Finally for most developing countries and many developed ones, reliable data on output at the sub-national level, particularly cities but even larger regions, is not regularly available.
Here is an example of how the methodology works. In 1998 there was a large deposit of rubies and sapphires accidentally discovered in southern Madagascar, near Ilakaka and Sakaraha. These towns went from backwoods villages to population centers with over 20,000 inhabitants. Economic growth obviously occurred, but no data on the subject is available–until now. The authors shed “light” on the problem (yes, that was an attempt at a joke!)
Think outside the box.
Maybe hire a satellite to watch for activity outside of corporate headquarters?
Or how about scouting out light data on the US and trying to beat out the gdp forecasts coming out of Wall Street?
The world is your oyster, go get it.
The authors of this paper are geniuses.
Note: This site provides NO information on our value investing ETFs or our momentum investing ETFs. Please refer to this site.
Join thousands of other readers and subscribe to our blog.
Please remember that past performance is not an indicator of future results. Please read our full disclosures. The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Alpha Architect, its affiliates or its employees. This material has been provided to you solely for information and educational purposes and does not constitute an offer or solicitation of an offer or any advice or recommendation to purchase any securities or other financial instruments and may not be construed as such. The factual information set forth herein has been obtained or derived from sources believed by the author and Alpha Architect to be reliable but it is not necessarily all-inclusive and is not guaranteed as to its accuracy and is not to be regarded as a representation or warranty, express or implied, as to the information’s accuracy or completeness, nor should the attached information serve as the basis of any investment decision. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission from Alpha Architect.
Definitions of common statistics used in our analysis are available here (towards the bottom)