Informality: GDP growth drives the country's “underground economy”


Author: Maurício Moraes, collaboration for Folha

Source: Folha de S. Paulo, 19/11/2008

The figure appears in the second edition of the Underground Economy Index, by FGV (Fundação Getulio Vargas) and Etco (Brazilian Institute of Competition Ethics), released yesterday. The non-formalized economy advanced 4,7% between December 2007 and June 2008, compared to the result of the previous semester. In the same semester, GDP increased 6% (compared to the same period in 2007).

The study by researcher Fernando de Holanda Barbosa Filho shows that the expansion of the formal economy does absorb informal workers, which does not slow down the underground economy. This, in turn, expands in the wake of the accelerated consumption of new formal workers.

The study challenges another myth, which estimates the share of the underground economy in GDP at 40%. "We still cannot measure exactly that, but 40% is an absurd number, we would be 40% richer like that, which is not real", he says.