Measuring the regional non-observed economy in China with nighttime lights

Purpose - The non-observed economy (NOE) is a pervasive phenomenon worldwide, especially in developing countries, but the size of the NOE and its contributions to the overall economy are usually unknown. This paper presents an estimation of the average size of the NOE for the 31 provincial regions in China between 1992 and 2013. Design/methodology/approach - This study uses the Defense Meteorological Satellite Program/Operational Linescan System (DMSP/OLS) nighttime light data combined with 11 existing surveys on or measurements of NOE for 191 countries or regions throughout the world, to measure the size of the NOE. Findings - The results show that the NOE share is unevenly distributed among China's provincial regions, with the smallest being 3.19% for Beijing and the largest being 69.71% for Ningxia. The national average is 43.11%, while the figures for the eastern region, middle region, northeastern region and western region are 39.3%, 47.6%, 44.7% and 43.6%, respectively. The NOE estimates are negatively correlated with the measured gross domestic product (GDP) and GDP per capita, which suggests that developed regions tend to have less NOE. Originality/value - The nighttime lights are used to measure the NOE for China's provincial regions. Compared with traditional databases, one of the prominent features of nighttime lights is its objectivity, as there is little human interference; therefore, it can be used to achieve more accurate results.