3. Informal sector:
A relevant part of emerging markets’ economy is not being captured by GDP. The informal sector, employing millions of people, generating substantial revenues and shaping the economic activity of many regions, is not taken into account in this metric.
The informal sector is the part of an economy that is neither taxed, nor monitored by any form of government. Unlike the formal economy, activities of the informal economy are not included in the gross domestic product of a country. [6]
Informal market is of great relevant to many economies. Employment in the informal sector, for example, makes up 48% of non-agricultural employment in North Africa, 51% in Latin America, 65% in Asia, and 72% in sub-Saharan Africa. In GDP …show more content…
While the difficulty in obtaining reliable statistics for this part of the economy cannot be blamed on the GDP complex methodology, but on the very nature of this sector, the fact that such relevant part of the economy is simply not factored in, undermines the importance and accuracy of GDP as a proxy for economic activity in several regions of the world. 4. …show more content…
“Since the GDP records every monetary transaction as positive, the costs of social decay and natural disasters are tallied as economic advance. Crime adds billions of dollars to the GDP due to the need for locks and other security measures, increased police protection, property damage, and medical costs. Divorce adds billions of dollars more through lawyer’s fees, the need to establish second households and so forth.” [7]
GDP measures mainly market transactions. It ignores social costs, environmental impacts and income inequality. If a business used GDP-style accounting, it would aim to maximize gross revenue — even at the expense of profitability, efficiency, sustainability or flexibility. That is hardly smart or sustainable. [2]
The GDP is myopically focused on the economic aspect of 1the triple bottom line and ignores the environmental and social bottom lines. This is not a problem of GDP per se. Yet since the end of the Second World War, promoting GDP growth has remained the primary national policy goal in almost every country and GDP has been understood as a proxy for society welfare.
Additional thoughts on GDP’s
A relevant part of emerging markets’ economy is not being captured by GDP. The informal sector, employing millions of people, generating substantial revenues and shaping the economic activity of many regions, is not taken into account in this metric.
The informal sector is the part of an economy that is neither taxed, nor monitored by any form of government. Unlike the formal economy, activities of the informal economy are not included in the gross domestic product of a country. [6]
Informal market is of great relevant to many economies. Employment in the informal sector, for example, makes up 48% of non-agricultural employment in North Africa, 51% in Latin America, 65% in Asia, and 72% in sub-Saharan Africa. In GDP …show more content…
While the difficulty in obtaining reliable statistics for this part of the economy cannot be blamed on the GDP complex methodology, but on the very nature of this sector, the fact that such relevant part of the economy is simply not factored in, undermines the importance and accuracy of GDP as a proxy for economic activity in several regions of the world. 4. …show more content…
“Since the GDP records every monetary transaction as positive, the costs of social decay and natural disasters are tallied as economic advance. Crime adds billions of dollars to the GDP due to the need for locks and other security measures, increased police protection, property damage, and medical costs. Divorce adds billions of dollars more through lawyer’s fees, the need to establish second households and so forth.” [7]
GDP measures mainly market transactions. It ignores social costs, environmental impacts and income inequality. If a business used GDP-style accounting, it would aim to maximize gross revenue — even at the expense of profitability, efficiency, sustainability or flexibility. That is hardly smart or sustainable. [2]
The GDP is myopically focused on the economic aspect of 1the triple bottom line and ignores the environmental and social bottom lines. This is not a problem of GDP per se. Yet since the end of the Second World War, promoting GDP growth has remained the primary national policy goal in almost every country and GDP has been understood as a proxy for society welfare.
Additional thoughts on GDP’s