Measuring Quarterly Economic Growth from Outer Space

Abstract

This paper presents a novel framework to estimate the elasticity between nighttime lights and quarterly economic activity, and provides the first set of estimates for the recent VIIRS nighttime light data. The relationship is identified by accounting for varying degrees of measurement errors in nighttime light data across countries. We estimate that the elasticity is 1.55 for emerging markets and developing economies, with only small deviations across country groups and different model specifications. Using a light-adjusted measure of quarterly economic activity, we show that higher levels of development, statistical capacity, and voice and accountability are associated with more precise national accounts data. The elasticity allows quantification of subnational economic impacts. During the COVID-19 pandemic, regions with higher levels of development and population density experienced larger declines in economic activity.

Keywords: Nighttime lights, economic measurement, quarterly GDP, national accounts, COVID-19