Estimation of Informal Economy: Figures for Developed and Underdeveloped Countries Around the World

Abstract

This paper estimates the size of the value added of the informal economy for 157 countries over 1991 to 2017 with the help of the MIMIC-method. The results show that OECD countries have by far the smallest informal economies, with sizes below 20 percent of official GDP. Moreover, informal economies are larger in Latin American and sub-Saharan African countries, averaging almost 38 and 39 percent of GDP, respectively. The average informal-economy size over all 157 countries and over 1991–2017 is 30.9 percent. The average decline in informal-economy size from 1991 to 2017 is a remarkable 6.8 percentage points. In addition, results of the size and development of undeclared or informal employment all over the world are shown. Except for Eastern Europe and Central Asia and Southern Africa, informal employment is above 50% of total employment and even over 88% in Southern Asia and Sub-Saharan Africa. Finally, some policy measures to reduce the informal economy and conclusions are given.