This paper seeks to illuminate the uncertainty in official GDP per capita measures using auxiliary data. Using satellite-recorded nighttime lights as an additional measurement of true GDP per capita, we provide a statistical framework, in which the error in official GDP per capita may depend on the country’s statistical capacity and the relationship between nighttime lights and true GDP per capita can be nonlinear and vary with geographic location. This paper uses recently developed results for measurement error models to identify and estimate the nonlinear relationship between nighttime lights and true GDP per capita and the nonparametric distribution of errors in official GDP per capita data. We then construct more precise and robust measures of GDP per capita using nighttime lights, official national accounts data, statistical capacity, and geographic locations. We find that GDP per capita measures are less precise for middle and low income countries and nighttime lights can play a bigger role in improving such measures.
This paper presents a novel framework to estimate the elasticity between nighttime lights and quarterly economic activity. The relationship is identified by accounting for varying degrees of measurement errors in nighttime light data across countries. The estimated elasticity is 1.55 for emerging markets and developing economies, ranging from 1.36 to 1.81 across country groups and robust to different model specifications. The paper uses a light-adjusted measure of quarterly economic activity to 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.
. Traditionally, a distinction is made among three approaches to GDPmeasurement: (a) the production approach, (b) the expenditure approach, and (c) the income approach. This distinction is somewhat artificial because these three approaches often use the same source data. For instance, government output and government consumption estimates are often based on the same source data; the estimates of fixed capital formation for the expenditure approach are partly based on output estimates of construction and production of machinery, which are also used in the production approach