Estimating the Real with the Virtual: How does the Accuracy Relate to the Internet Penetration?

Abstract

Direct measurements of the real world are typically expensive and time-consuming. Recent studies have revealed the promising quick alternative where real-world characteristics are indirectly estimated based on data readily available in the Internet. Such methods for indirect virtual-world estimation of real-world properties rely on the implicit hypothesis that the estimation accuracy depends on how extensively the Internet penetrates into the real world. Our paper makes the first step towards validating this hypothesis. We adopt a simple statistical model to quantify the relationship between an index of consumer prices and online searches for respective categories of goods and services across 19 countries. We also show how the strength of this relationship depends on Internet-penetration and other socioeconomic variables.