Informal economics

In a discussion on Twitter last week about the rebasing exercise that increased Nigeria’s GDP by 89%, Olumide Abimbola offered to provide a reading list in informal economic activity – and here it is, very useful.The list includes Keith Hart’s pioneering paper – Keith wrote a retrospective as the intro to a more recent (2006) book, [amazon_link id=”0199237298″ target=”_blank” ]Linking the Formal and Informal Economy: Concepts and Policies[/amazon_link], edited by Basudeb Guha-Khasnobis, Ravi Kanbur and Elinor Ostrom.

I have a couple of other suggestions to add.

For estimates of the size of the informal economy in different countries, the work of Friedrich Schneider and Dominic Enste, published by the IMF, is the most comprehensive  Рinitially in this 2002 publication, but there are no later estimates that I can find, although Schneider and Andreas Buehn have a working paper about methodology.

A nice general read is Robert Neuwirth’s [amazon_link id=”0307279987″ target=”_blank” ]The Stealth of Nations[/amazon_link], reviewed by me here.

[amazon_image id=”0307279987″ link=”true” target=”_blank” size=”medium” ]Stealth of Nations: The Global Rise of the Informal Economy[/amazon_image]

And, in terms of the economics literature, that’s about it. Which is extraordinary when you think about what an important phenomenon informal economic activity is. The IMF estimates put it at between 14/16% of GDP in the OECD countries (much more in some) to as high as 44% in low-income countries. Economists can be lazy about finding data, and ignoring phenomena for which there are no readily-available data. But surely this is too big to ignore? All the more so as:

  • globalization has allowed multinational criminal enterprise (as well as international finance) to flourish – see Misha Glenny’s reportage eg in [amazon_link id=”0099481251″ target=”_blank” ]McMafia[/amazon_link] or the wonderful [amazon_link id=”0099541726″ target=”_blank” ]Treasure Islands [/amazon_link]by Nicholas Shaxson on tax evasion
  • new technologies have changed the decision margin between formal and informal activity in several ways – for example, mobiles helping people in the developing world transition into the formal sector
  • in the digital world, new types of “peer production” are emerging, in a new kind of informal space the authorities don’t know how to deal with – The Umlaut had a very interesting article about this recently. And then there’s Bitcoin etc.

[amazon_image id=”0099481251″ link=”true” target=”_blank” size=”medium” ]McMafia: Seriously Organised Crime[/amazon_image]

On Twitter, @illicit_econ does sterling work linking to articles and news of interest on the subject. Which economists out there are publishing research on the informal and/or illicit economy, though? Who can add more to this resource list?