Illuminating Economic Growth

Abstract

This paper seeks to illuminate the uncertainty in official GDP per capita measuresusing auxiliary data. Using satellite-recorded nighttime lights as an additional measurementof true GDP per capita, we provide a statistical framework, in which the error inofficial GDP per capita may depend on the country's statistical capacity and the relationshipbetween nighttime lights and true GDP per capita can be nonlinear and varywith geographic location. This paper uses recently developed results for measurementerror models to identify and estimate the nonlinear relationship between nighttime lightsand true GDP per capita and the nonparametric distribution of errors in official GDP percapita data. We then construct more precise and robust measures of GDP per capita usingnighttime lights, official national accounts data, statistical capacity, and geographic locations.We find that GDP per capita measures are less precise for middle and low incomecountries and nighttime lights can play a bigger role in improving such measures.

Keywords: Low income countries, Economic growth, Development, Emerging markets, Technological innovation, Nighttime lights, measurement error, GDP per capita., real GDP, optimal weight, income country, official measure, middle income country

JEL Classification: E01, E23, C18, F16, O4, L31, D4, E2, E24, Z13