8. Underground economy

In this and the next lecture we will be discussing GDP. One of the things not included in GDP is the underground economy. Globe and Mail reported on 19/9/2012 that most Canadians have paid under the table to avoid taxes. No surprise there. The article references a Statistics Canada report (the link in the paper is bad; to find the report Google: Estimating the Underground Economy in  Canada, 1992-2008, click on the www.carpenters.org link - it is from the United Brotherhood of Carpenters - now, that is funny: why would carpenters read a report on paying under the table?). Big surprise here: the underground economy in Canada is only 2.2% of GDP. The estimates I have seen are much higher. An IMF article, provides estimates for 1990 using several methods; for Canada the size of the underground economy is between 10% and 13.5%, depending on the method. The difference may be due to the fact that the Statistics Canada report does not include illegal activities.