Estimating the size of the underground economy in Barbados

Author(s): Greenidge, Kevin; Holder, Carlos; Mayers, Stuart (2006)

Created 01 Jan, 2006
Categories Working Papers
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In Barbados, and the Caribbean as a whole, very little research has been done on the topic of the informal economy. This paper estimates the size of the Barbadian informal sector for the period 1972-2003. Our estimates suggest that this sector is quite large and has grown over time to about one-third the size of the official economy. These results are consistent with the stylised fact about the Barbadian economy, in particular the large number of persons employed in small business and trading versus the number tax returns filed on an annual basics and also claiming to have incomes way below taxable levels. The finding of a significant sized informal sector also has implications for the conduct of both monetary and fiscal policy. At the minimum it means that possible spill-over effects between the two sectors must be taken into consideration in the design and execution of policies.

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