A recent paper by the University of Chicago’s Luis Martinez shines a light on the extent to which autocratic governments might be juicing their estimates of gross domestic product, the commonly used measure of an economy’s size and might.

This is a fascinating use of data - it measures light from countries viewed from satellites to estimate a country’s GDP (Gross Domestic Production) - more light equals greater economic output, is the assumption. On average, he noticed that in many partially free and autocratic countries, the reported GDP exceeded the amount of light measured by satellites. Overstating GDP has been a historical problem, especially in autocratic countries. There is only one source for GDP, the country that reports it.

As you can observe from the graph below, countries such as Russia and China have been overstating their GDP by half to a full percent - this is not a surprise to many global economists. India does stand out as unique among large free countries that typically don’t overstate GDP.

This shows that sometimes you can get external data to prove or dismiss data that usually is not available to scrutinize. What is the downside of using this specific data? Further, consider whether “light” is a leading or lagging GDP indicator.

Wall Street Journal, 01212023, Josh Zumbrun

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