Questionnaires and surveys, for instance, rely on respondents being truthful, which may not happen if it requires admitting to not reporting taxes.Īnother direct measure involves calculating the discrepancy between income declared for tax purposes and that measured by selective checks. Direct Approachesĭirect attempts to measure the size of the informal economy typically have circumstances that make them problematic. 1 However, as an article by Economist Paulina Restrepo-Echavarria in The Regional Economist points out, measuring the informal economy is quite difficult. It is estimated to be as much as 36 percent of the gross domestic product (GDP) of developing nations and 13 percent of developed countries’ GDP.
The informal economy, also known as the underground economy or the black market, makes up a significant portion of the overall economy.
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