How Much Should We Trust the Dictator's GDP Growth Estimates?

Abstract

I study the manipulation of GDP growth statistics in non-democracies by comparing the self-reported GDP figures to the nighttime lights recorded by satellites from outer space. I show that the night-lights elasticity of GDP is systematically larger in more authoritarian regimes. This autocracy gradient in the elasticity is not explained by potential differences in a large set of country characteristics, including economic structure, urbanization, corruption, state capacity or levels of development. The gradient is larger when countries have a stronger incentive to exaggerate economic performance or when the institutions that constrain the manipulation of official statistics are weaker. I estimate that the most authoritarian regimes inflate yearly GDP growth rates by a factor of 1.15-1.3 on average. I show that correcting for data manipulation provides a more nuanced view on the economic success of non-democracies in recent years and affects our understanding of the effect of foreign aid on growth.

Keywords: GDP, nighttime lights, economic growth, democracy

JEL Classification: C82, D73, E01, H11, O47