The document discusses methods for measuring informal economic activities at regional levels in developing countries. It proposes using a 1-2 survey approach combining a labor force survey to identify household enterprises (HUEMs) followed by a survey of those HUEMs. An alternative is a full household survey. For quarterly estimates, employment data from labor force surveys could be extrapolated using productivity adjustments compared to formal businesses. Reliable regional measurement of informal activities is important for gross regional product estimates.

1. Viet Vu
Consultant to United Nations’ Statistics
Division
15-17 March 2010

2. Importance of reliable measurement
of informal activities at regional
levels in developing countries
 At national level (*)
 On the basis of statistics on the informal economy that are still
unreliable, ILO provides the following tentative picture of its
relevance.
 In developing countries, informal employment makes up 48% of
non-agricultural employment in North Africa, 51% in Latin
America, 65% in Asia, and 72% in Sub-Saharan Africa.
 If agricultural employment is included, the percentages rises, in
some countries like India and many sub-Saharan African countries
beyond 90%.
 Estimates for developed countries are around 15%.
 At regional level:
 Share of informal activities in many regions are higher than the
national average;
 Thus, reliable measurement of informal activities at regional levels
are important to the measurement of GRPs.
(*) Source:
http://www.ilo.org/public/english/bureau/inst/publications/discussion/dp19308.
pdf

3. Households as statistical units in SNA
production framework: refined definition
Area SNA household sector SNA SNA
subje
corporations general
ct to
1-2
sector governmen
surve t sector
y and NPISH
sector
HUEM units Non-HUEM Househ Incorporat Nonmarket
units: old ed units
quasi- enterprise (general
Agriculture Non- •Producing corps. s government
(commercia Agriculture only for own , NPISH)
l final uses This is the
agriculture) •Subsistence part of the
farmers system that
Inform Forma Infor Forma
the ILO is
al l mal l interested
statistical units: household enterprises that in
do not incorporate

4. General practices in
economic statistics
Corporations sector: corporations, whether large
or small are independent legal units and therefore
must register with authorities, they can be subject
to sample survey. The main requirement is that the
list frame must be frequently updated. This list
frame include basic information:
 Address
 Number of employees
 Sales
 Major activity classified by ISIC.
Household sector: all unincorporated activities of
the households must be measured in national
accounts, whether they are “informal” as defined by
the ILO or by ESCAP project or not.

5. Household production
activities
 Non-HUEMs: Household unincorporated enterprises producing only
for own final consumption. This includes subsistence farmers.
 HUEMs: are household unincorporated enterprises as defined by the
SNA, but:
 (1) with “primary objective of generating employment and
incomes to the persons concerned” as defined by the ILO
in the resolution of the 15th ICLS (SNA2008, 25.37); and
 (2) “with at least some production for sale or barter
(SNA2008, 25.46)”.
 HUEMs as defined above must have entrepreneurial spirit in the sense
that:
 Produce for the market on a regular basis; therefore HUEMs
 Should exclude the unincorporated household units that have some
incidental sales, and subsistence farmers who must sell some of their
outputs on the market to pay for nonfood survival needs.

6. Household activities
measurement: ATERNATIVE I
Non-HUEMS for own final consumption: Based on
normal agricultural survey at regional levels
 Agriculture: Land use are x Yield rate per unit of land
 Livestock: Output of live animals + imports = animals
slaughtered + exports + change in animal stock
HUEMS: 1-2 survey (UNESCAP’s proposal) include:
 Stage 1: Utilize Labour Force’s survey (surveying households) to
identify HUEMS (unincorporated units produced for the market)
 Stage 2: Survey HUEMS for labour, output, intermediate
consumption and value added.
Extrapolation using 1-2 survey and employment in
Labour Force survey

7. Household activities
measurement: ATERNATIVE
I (extrapolation)
 Assumption 1: Informal employment = LFS employment less ES
employment
 Assumption 2: productivity of informal activity with respect to
productivity of small incorporated enterprises remain the same as in the
benchmark year and lower.
 Value added per employee of HUEMs less or equal to a given percentage of
value added of small incorporated enterprises
 Assumptions 1 and 2 are used to estimate value added for HUEMs.
 ADVANTAGES OF THE METHOD:
 If LFS and ES employment are available quarterly and for all regions, it is
possible to estimate GRP quarterly.
 DISADVANTAGES OF THE METHOD:
 LFS focuses on employment of persons at given locations, not location of
employment. Additional information is needed to allow for the reclassification
of employment by place of residence to employment by place of work.

8. Household activities measurement:
ATERNATIVE II: full-fledged household
survey: Case of Laos (Diary still used in
Japan)

9. Household activities
measurement: Alternative II
Extrapolation should also be based on LFS

10. An integrated survey program
to satisfy both national and
regional accounts
Benchmark surveys: every five years. Benchmark
household survey (whatever form) may take place
every five years.
Quarterly and annual estimation, separately for:
 Agriculture (cultivated land area and yield rate)
 Other non-agricultural own final consumption (a fixed ratio
of agriculture?)
 Unincorporated informal activities: employment
 Incorporated activities: sampling survey
 Government activities: budget data
 Non-profit institutions serving HH: employment
Countries need to collect employment data by
developing both regular Establishment Survey and
Labor Force Survey. Probably the most economic
way to collect information on household activities.

11. Application on regional
value added
estimation/extrapolation
Assumption: Informal employment is assumed to be the
difference between LFS employment and ES employment.
Productivity adjustment: Productivity difference between
formal and informal activities by activity need to be
introduced to estimate corporate employment equivalent.
This can be done at:
 Industry average for corporations or
 Industry average for only small incorporated enterprises if
data are regularly available.
Use corporate employment equivalent to estimate regional
output and value added.