Editing Informal economy (section)

==Statistics==
{{See also|List of countries by share of informal employment in total employment}}[[File:Khar Zakh (Black Market), Ulan Bator, Mongolia.jpg|thumb|right|The Narantuul Market in [[Ulaanbaatar]], [[Mongolia]], colloquially also called Khar Zakh (Black Market)]]
The informal economy under any governing system is diverse and includes small-scaled, occasional members (often [[street vendor]]s and garbage recyclers) as well as larger, regular enterprises (including transit systems such as that of [[La Paz, Bolivia]]). Informal economies include garment workers working from their homes, as well as informally employed personnel of formal enterprises. Employees working in the informal sector can be classified as wage workers, non-wage workers, or a combination of both.<ref name=":5">Carr, Marilyn and Martha A. Chen. 2001. "Globalization and the Informal Economy:
How Global Trade and Investment Impact on the Working Poor". Background paper commissioned by the ILO Task Force on the Informal Economy. Geneva, Switzerland: International Labour Office.</ref>

Statistics on the informal economy are unreliable by virtue of the subject, yet they can provide a tentative picture of its relevance. For example, informal employment makes up 58.7% of non-agricultural employment in Middle East – North Africa, 64.6% in [[Latin America]], 79.4% in [[Asia]], and 80.4% in [[sub-Saharan Africa]].<ref>Charmes, Jacques. [https://europa.eu/capacity4dev/file/43504/download?token=k-kX-dVJ "The informal economy: Definitions, Size, Contribution, Characteristics and Trends"], RNSF, Rome, 2016.</ref> If agricultural employment is included, the percentages rise, in some countries like [[India]] and many sub-Saharan African countries beyond 90%. Estimates for developed countries are around 15%.<ref name="ilo">{{cite book
|url=http://www.ilo.org/stat/Publications/WCMS_234413/lang--en/index.htm
|title=Women and Men in the Informal Economy
|publisher=[[International Labour Organization]]
|year=2002
|isbn=978-92-2-113103-8
|access-date=2006-12-18
|format=PDF
|archive-date=2014-04-15
|archive-url=https://web.archive.org/web/20140415131127/http://www.ilo.org/stat/Publications/WCMS_234413/lang--en/index.htm
|url-status=dead
}}</ref> In recent surveys, the informal economy in many regions has declined over the past 20 years to 2014. In Africa, the share of the informal economy has decreased to an estimate of  around 40% of the economy.<ref>{{Cite news|url=https://www.economist.com/news/finance-and-economics/21721947-shadow-economy-still-equivalent-about-40-gdp-africas-informal|title=Africa's informal economy is receding faster than Latin America's|newspaper=The Economist|access-date=2017-05-28|date=2017-05-13}}</ref>

In developing countries, the largest part of informal work, around 70%, is self-employed. Wage employment predominates. The majority of informal economy workers are women. Policies and developments affecting the informal economy have thus a distinctly gendered effect.

===Estimated size of countries' informal economy===
To estimate the size and development of any underground or shadow economy is quite a challenging task since participants in such economies attempt to hide their behaviors. One must also be very careful to distinguish whether one is attempting to measure the unreported economy, normally associated with tax evasion,<ref>{{cite web|url=https://www.irs.gov/pub/irs-soi/06rastg12methods.pdf |title=Preliminary Estimates of the Tax Year 2006 Underreporting Gap |website=Irs.gov |access-date=2016-10-20}}</ref>  or the unrecorded or non-observed economy,<ref>{{cite web|url=http://www.oecd.org/std/na/measuringthenon-observedeconomy-ahandbook.htm |title=Measuring the Non-Observed Economy – A Handbook |publisher=OECD |access-date=2016-10-20}}</ref> associated with the amount of income that is readily excluded from national income and produce accounts due to the difficulty of measurement.
There are numerous estimates of [[tax noncompliance]] as measured by tax gaps produced by [[audit]] methods or by "top down" methods.<ref name="Anon. r903">{{cite web | title=Measuring tax gaps 2015 edition | url=https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/469973/HMRC-Measuring-tax-gaps-2015-methodological-annex.pdf | access-date=2024-04-05 | archive-url=https://web.archive.org/web/20151117031417/https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/469973/HMRC-Measuring-tax-gaps-2015-methodological-annex.pdf | archive-date=2015-11-17 | url-status=dead }}</ref>
Friedrich Schneider and several co-authors<ref>http://www.econ.jku.at/.../Schneider_Bühn_Montenegro.pdf{{Dead link|date=May 2021 |bot=InternetArchiveBot |fix-attempted=yes }}</ref> claim to have estimated the size and trend of what they call the "shadow economy" worldwide by a currency demand /[[MIMIC]] model approach that treats the "shadow economy" as a latent variable. [[Trevor S. Breusch]] has critiqued the work and warned the profession that the literature applying this model to the underground economy
abounds with alarming Procrustean tendencies. Various kinds of sliding and scaling of the results are carried out in the name of "benchmarking", although these operations are not always clearly
documented. The data are typically transformed in ways that are not only undeclared but have the unfortunate effect of making the results of the study sensitive to the units in which the variables are measured.

The complexity of the estimation procedure, together with its deficient documentation, leave the reader unaware of how these results have been shorted to fit the bed of prior belief. There are many
other results in circulation for various countries, for which the data cannot be identified and which are given no more documentation than "own calculations by the MIMIC method". Readers are advised to
adjust their valuation of these estimates accordingly.<ref>[http://econ.unimelb.edu.au/SITE/workshops/]{{dead link|date=October 2016}}</ref>

[[Edgar L. Feige]]<ref>{{cite journal|ssrn=2728060|title=Reflections on the Meaning and Measurement of Unobserved Economies: What Do We Really Know About the 'Shadow Economy'|first=Edgar L.|last=Feige|date=1 February 2016}}</ref> finds that Schneider's shadow economy "estimates suffer from conceptual flaws, apparent manipulation of results and insufficient documentation for replication, questioning their place in the academic, policy and popular literature".

===Comparison of shadow economies in EU countries===
[[File:German Shadow Economy.png|thumb|German shadow economy 1975–2015, Friedrich Schneider University Linz<ref name=statista>{{cite web|url=http://de.statista.com/statistik/daten/studie/20063/umfrage/entwicklung-des-umfangs-der-schattenwirtschaft-seit-1995/ |title= Schattenwirtschaft – Umfang in Deutschland bis 2016 |website=De.statista.com |date=2016-10-01 |access-date=2016-10-20}}</ref>]]

As of 2013, the total EU shadow economy had been growing to about 1.9 trillion € in preparation of the EURO<ref name="atkearny">{{Cite web|url=http://www.atkearney.com/documents/10192/1743816/The%2BShadow%2BEconomy%2Bin%2BEurope%2B2013.pdf|archive-url=https://web.archive.org/web/20150226032859/http://www.atkearney.com/documents/10192/1743816/The%2BShadow%2BEconomy%2Bin%2BEurope%2B2013.pdf|archive-date=2015-02-26|title=404 Page - Kearney}}</ref> driven by the motor of the European shadow economy, Germany, which had been generating approx. 350 bn € per year<ref name=statista /> since the establishment of the Single Market in Maastricht 1993, (see diagram on the right). Hence, the EU financial economy had developed an efficient tax haven bank system to protect and manage its growing shadow economy. As per the [[Financial Secrecy Index]] (FSI 2013)<ref>{{Cite web | url=http://www.financialsecrecyindex.com/introduction/fsi-2013-results | archive-url=https://web.archive.org/web/20131108014810/http://www.financialsecrecyindex.com/introduction/fsi-2013-results | url-status=dead | archive-date=2013-11-08 | title=Financial Secrecy Index – 2013 Results}}</ref> Germany and some neighbouring countries, ranked among the world's top tax haven countries.

The diagram below shows that national informal economies per capita vary only moderately in most EU countries. This is because market sectors with a high proportion of informal economy (above 45%)<ref name="FS">{{Cite web |last=Friedrich Schneider |date=March 2012 |title=The Shadow Economy and Work in the Shadow : What Do We (Not) Know? |url=http://ftp.iza.org/dp6423.pdf |access-date=2016-10-20 |website=Ftp.iza.org |pages=73 |language=english}}</ref> like the [[construction sector]] or agriculture are rather homogeneously distributed across countries, whereas sectors with a low proportion of informal economy (below 30%)<ref name=FS/> like the finance and [[business sector]] (e.g. in Switzerland, Luxembourg), the public service and personal [[Service Sector]] (as in Scandinavian countries) as well as the [[retail industry]], wholesale and repair sector are dominant in countries with extremely high GDP per capita i.e. industrially highly developed countries. The diagram also shows that in absolute numbers the shadow economy per capita is related to the wealth of a society (GDP). Generally spoken, the higher the GDP the higher the shadow economy, albeit non-proportional.

There is a direct relationship between high self-employment of a country to its above average shadow economy.<ref>{{cite web |url=http://ftp.iza.org/dp6891.pdf |title=Shadow Economies in Highly Developed OECD Countries : What Are the Driving Forces? |author=Friedrich Schneider |website=Ftp.iza.org |access-date=2016-10-20}}</ref> In highly industrialized countries where shadow economy (per capita) is high and the huge [[private sector]] is shared by an extremely small elite of entrepreneurs a considerable part of tax evasion is practised by a much smaller number of (elite) people. As an example German shadow economy in 2013 was €4.400  per capita, which was the 9th highest place in EU, whereas according to OECD only 11.2% of employed people were self-employed (place 18).<ref>{{cite web|url=https://data.oecd.org/emp/self-employment-rate.htm |title=Employment – Self-employment rate OECD Data |website=Data.oecd.org |access-date=2016-10-20}}</ref> On the other hand, Greece's shadow economy was only €3.900  p.c (place 13) but self-employment was 36.9% (place 1).

An extreme example of shadow economy camouflaged by the financial market is Luxembourg where the relative annual shadow economy is only 8% of the GDP which is the second lowest percentage (2013) of all EU countries whereas its absolute size (€6.800  per capita) is the highest.

[[File:Shadow economy 2013.png|thumb|Map of the national shadow economies per capita in EU countries. The red scale represents the numbers displayed by the red bars of the diagram on the left.]]

[[Image:Total GDP 2013.png|800px|The total national GDP of EU countries, and its formal and informal (shadow economy) component per capita<ref name=atkearny /><ref>{{cite book|first1=Friedrich |last1=Schneider|title=The Shadow Economy in Europe|date=2013|publisher=University of Linz}}</ref>]]