Space Economy Investment Analysis

Econometric Framework for Government Investment Prioritization

Design Selection FrameworkRecommended: Hybrid Approach
Choosing between time-series with exogenous regressors (ARX) vs. quasi-experimental causal inference

Option A: ARX Time-Series

Primary

Autoregressive model with exogenous intervention variables for forecasting and policy simulation

Leverages adjusted baseline from OCEA/MITRE AR(1) methodology
Accommodates policy variables as exogenous regressors
Produces prediction intervals for decision uncertainty
Cannot establish causal effects without additional structure

Option B: Quasi-Experimental

Secondary/Validation

Difference-in-differences or synthetic control for causal identification of intervention effects

Establishes causal effect of specific interventions
Controls for confounding via parallel trends assumption
Requires valid control group or donor pool
Limited by data availability across sectors/countries
Recommended Hybrid Design
Two-stage approach combining forecasting power with causal identification

Stage 1: ARX Forecasting

Extend OCEA AR(1) model with intervention indicators and policy-relevant exogenous variables

Stage 2: Causal Validation

Apply DiD/synthetic control to historical interventions to validate multiplier estimates

Stage 3: Decision Integration

Combine forecasts and causal estimates into multi-criteria ranking framework

Rationale for Hybrid Approach

  • 1.Adjusted Baseline Compatibility: The OCEA inflation-adjusted, de-duplicated series (real 2024 USD) provides a clean dependent variable that avoids the systematic overestimation found in CAGR-based forecasts.
  • 2.Policy Relevance: Government must evaluate interventions across heterogeneous objectives (commercial adoption, NASA missions, strategic competition) requiring both forecasting and causal attribution.
  • 3.Data Limitations: Annual space economy observations (T≈15) favor parsimonious AR models; cross-sectional variation (by sector or country) enables quasi-experimental designs for specific interventions.
Data Requirements & Baseline Construction

Dependent Variable

Y_t

Adjusted real space economy value (GDPDEF or PPI-adjusted, double-counting removed)

Source: SIA adjusted series per OCEA methodology

Intervention Variables

X_t

Government R&D appropriations, procurement contracts, regulatory changes, partnership announcements

Source: NASA budget data, FAA/FCC filings

Control Variables

Z_t

GDP growth, interest rates, competing nation spending (China, ESA), technology readiness levels

Source: BEA, OECD, intelligence assessments

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