## BPM7 Chapter 18/2025 SNA Chapter 39. Informal Economy: Annotated Outline

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### A. Introduction
- Informal productive activities provide employment and income to many people who might otherwise be unemployed and tend to make workers and enterprises vulnerable to negative economic shocks, with consequences for inequality and poverty.
- Measuring the informal economy is important for designing, implementing, monitoring, and analyzing macroeconomic and social policies; the measurement framework aims to ensure consistent measures of informal production and informal labor inputs to inform policy decisions that may decrease vulnerability of informal workers and enterprises.
- Definitions and scope:
  - The informal economy includes all informal productive activities carried out by workers or economic units within the general production boundary; informal productive activities encompass informal labor inputs and informal production.
  - The informal sector is a subset of the informal economy: household unincorporated market enterprises and associated labor input not formally recognized by government authorities because they are not registered for tax or similar purposes.
- New informal activities have emerged with digitalization (for example, informal taxi drivers), often associated with lower and uncertain income for workers.
- The 2008 SNA recognized the importance of informal activities and integration into national accounts but did not provide a comprehensive statistical framework; since 2018, the ILO has developed a comprehensive and improved framework summarized in the chapter.
- Distinction from the non-observed economy: the non-observed economy is conceptually distinct and includes activities not captured in regular statistical enquiries; overlaps exist but concepts serve different purposes. The chapter focuses principally on the informal economy, with a concluding section on the non-observed economy and its relation to informality.
- The Introduction summarizes the chapter’s structure.

### B. Framework for the Informal Economy
- Overarching concept: all informal productive activities carried out by workers or economic units within the general production boundary.
- Informal productive activities are defined as productive activities carried out by persons or economic units that are—in law or in practice—not covered by formal arrangements; the framework recognizes two linked perspectives: workers and economic units.
- Assignment of economic units:
  - All non-household economic units (corporations, general government, and NPISHs) are assigned to the formal sector as they are formally recognized producers.
  - Households are assigned to the formal sector if production is through a household unincorporated market enterprise that is registered for tax or similar purposes and formally recognized.
  - Households are assigned to the informal sector if they undertake production mainly intended for the market through an unregistered household unincorporated market enterprise (not registered for tax or similar purposes). The ILO criterion that the informal sector comprises production mainly intended for the market is close to the SNA requirement that all or most output be sold.
  - Households producing goods and services mainly intended for own final use are assigned to the household own-use production sector, which is included in the informal economy but not part of the informal sector.
- Treatment and properties of household unincorporated market enterprises:
  - Such enterprises may lack complete accounts; assets may not be separable between household consumption and production roles.
  - Informal household unincorporated market enterprises = informal enterprises; all production within the informal sector is part of the informal economy.
  - The informal sector includes agricultural production of informal enterprises.
  - Enterprise size is not a criterion for classifying household unincorporated market enterprises as informal.
  - A single household can carry out multiple informal market production activities; such activities should be identified as separate informal enterprises if feasible.
  - All labor inputs in the informal sector are informal.
- Household own-use production sector:
  - Includes households producing goods and services mainly for own final consumption, informal or temporary NPISHs, and direct volunteer work.
  - Extends beyond the SNA production boundary by including production of services by households for own use, direct volunteering, and services produced by informal NPISHs.
  - Production of informal or temporary NPISHs and direct volunteer work is always informal.
  - Housing services of owner-occupiers are by convention excluded from the informal economy.
  - Household own-use production—other than housing services of owner-occupiers, informal or temporary NPISHs, and direct volunteering—that is undertaken using household labor is mostly informal, though exceptions are possible.
- Formal sector production and informal labor inputs:
  - Production/international trade by formal economic units, including undeclared and underdeclared production/international trade, is not part of the informal economy (but may be accounted for as non-observed production activity / international trade).
  - Formal economic units can use informal labor inputs; such labor inputs are part of the informal economy and are compiled from a labor statistics perspective.
- Illegal activities:
  - The SNA’s general guidance on illegal activities applies; most, but not all, illegal productive activities would be part of the informal economy if informality principles are applied.
  - Production of goods and services whose sale, distribution, or possession is forbidden by law are by convention excluded from the informal economy; statistics on informality should be supplemented with measures of such illegal productive activities.
  - Production that is usually legal but becomes illegal when carried out by unauthorized producers should be included in the informal economy.
- The chapter will incorporate IE.1 Guidance Note Boxes and Figure showing scope and a decision tree to identify informal productive activities.

### C. Digitalization and Informal Cross Border Flows
- Digitalization:
  - Digitalization has penetrated many aspects of economic activity and raises concerns about possible mismeasurement.
  - Some new types of informal economic activities use digital technologies and create jobs that may be formal or informal; many are dependent contractors (treated in Section D).
  - Dependent contractors facilitated by digitalization typically depend on formal enterprises (possibly non-resident) that provide a digital intermediation service; assignment of the household unincorporated market enterprise to formal or informal sector uses the usual criteria.
- Informal cross-border flows:
  - Problems arise in external sector statistics when transactions outside the scope of regular statistical enquiries and data collection systems are omitted; omissions may be related to informal economy activities or to activities by formal enterprises with formal labor inputs.
  - Examples: merchandise trade statistics may omit shuttle trade undertaken by household unincorporated market enterprises not covered by customs recording.
  - The informal economy framework can be used for external transactions including:
    - Informal cross-border transactions in goods (including shuttle trade and smuggling of legitimate goods by informal units).
    - Informal services (including tourism services such as room rental and informal restaurants and bars).
    - Remittances transmitted through informal channels; households may transmit income derived from the informal economy as remittances through formal or informal money transfer channels.
- Illicit financial flows:
  - Illicit financial flows should be distinguished from cross-border informal economy flows.
  - Four main types of activities can generate illicit financial flows: (i) tax and commercial activities, (ii) illegal markets, (iii) corruption, and (iv) exploitation-type activities and financing of crime and terrorism.
  - Illicit financial flows can emerge as illicit income generation or illicit income management.
  - Illicit financial flows should be distinguished from illegal transactions; illegal transactions are treated no different from legal transactions and are included in the balance of payments statistics framework.
  - Not all illicit financial flows are transactions; therefore, not all such flows would be recorded in macroeconomic statistics.
  - Flows arising from exploitation-type activities are not transactions and are therefore excluded from the balance of payments statistics.

### D. Informal Work
- Relation to ILO terminology:
  - The chapter introduces ILO definitions of job/work activity, independent workers, dependent workers, employment for profit, and employment for pay before defining informal employment categories.
- Categories of informal employment:
  - Employers are in informal employment if they operate and own or co-own a household unincorporated market enterprise.
  - Dependent contractors:
    - Own and operate household unincorporated market enterprises and have contractual arrangements of a commercial nature (but not a contract of employment) to provide goods or services for or through another economic unit, as described in IE.1 GN, paragraphs 50–51.
    - Many new forms are facilitated by digitalization.
    - Dependent contractors are in informal employment if they:
      - do not own or co-own a formal economic unit and are not registered for tax and thereby do not have a formal status, or
      - own or co-own a formal economic unit or are registered for tax and thereby have a formal status but without effective access to formal arrangements intended to reduce the economic risk related to the job.
  - Employees are in informal employment if their employment relationship is not in practice formally recognized by the employer in relation to the legal administrative framework and not associated with effective access to formal arrangements such as labor legislation, social protection, income taxation, or entitlement to employment benefits; this includes domestic staff when there is no formal arrangement.
  - Contributing family workers are in informal employment if their job is not in practice formally recognized in relation to the legal administrative framework.
- Partly informal productive activities and formal jobs:
  - All labor inputs of workers in informal jobs and informal work activities are informal.
  - Workers in formal employment can also provide informal labor inputs to economic units in the formal sector (for example, when income and hours worked are not declared).
- Other informal forms of work:
  - Direct volunteering is always informal.
  - Organization-based volunteer work is informal if carried out for an informal NPISH or an informal sector enterprise, or for or through a formal economic unit when the volunteer is not covered by formal arrangements that protect the worker and regulate the activity.
  - Unpaid trainee work is informal if not effectively covered by formal arrangements that aim to protect the worker and facilitate and regulate the work.
  - Own-use production work is informal if not effectively covered by formal arrangements that aim to promote or facilitate the work and protect and regulate the worker.
- The chapter will include Tables 2 and 3 from the appendix of the ILO’s “Statistics for the informal economy” showing informal productive activities by persons and informal/formal jobs by status and sector.

### E. The Non-Observed Economy
- Definition and relation to informality:
  - The non-observed economy is the extent of economic activity missing from statistical data collections and administrative sources, including some illegal activities; it overlaps with but is not the same as the informal economy.
- International accounts implications:
  - International transactions (and possibly positions) missing from statistical data collection and administrative sources constitute non-observed elements of the international accounts; omissions may relate to informal economy activities or to undeclared/underdeclared production and trade by formal units.
  - Merchandise trade statistics may omit items traded by formal enterprises.
- Measurement and estimation:
  - Assembling national accounts, especially using the supply and use framework, highlights missing information including illegal activities; balancing supply and use tables may estimate some non-observed activity but may not capture all of it.
  - Techniques in Measurement of the Non-Observed Economy: A Handbook are useful for measuring both the non-observed economy and some aspects of informal enterprises.

### F. Guidelines, Studies, and Handbooks on the Informal Economy
- Reviews and cites guidelines, studies, and handbooks intended to assist compilers of statistics on the informal economy and the non-observed economy.
- Examples of guidance cited include:
  - reports of the BOPCOM Task Force on the Informal Economy;
  - the IMF paper, “Measuring the Informal Economy”;
  - ILO reports and guidelines, including “Statistics for the informal economy” and “Conceptual framework for statistics on informal economy” (documents prepared for meetings on 7–10 February 2023);
  - ICLS resolutions;
  - Conceptual Framework for Statistics on Informal Economy;
  - proceedings and papers of the Delhi Group on Informal Sector Statistics.
- References and consultations listed include GN IE.1 and ILO documents prepared for meetings on 7–10 February 2023, and key stakeholders consulted such as System of National Account and Balance of Payments Manual editors, International Labour Organization, Joint Informal Economy Task Team, AEG, BPTT.

*BPM7 Chapter 18/2025 SNA Chapter 39. Informal Economy: Annotated Outline — Approved/Final Version (prepared by Brent Moulton and Patrick Quill).*

### Section 1

### BPM7 Chapter 18/2025 SNA Chapter 39. Informal Economy: Annotated Outline

### A. Introduction
- Informal productive activities provide employment and income to many people who might otherwise be unemployed and tend to make workers and enterprises vulnerable to negative economic shocks, with consequences for inequality and poverty.
- Measuring the informal economy is important for designing, implementing, monitoring, and analyzing macroeconomic and social policies; the measurement framework aims to ensure consistent measures of informal production and informal labor inputs to inform policy decisions that may decrease vulnerability of informal workers and enterprises.
- Definitions and scope:
  - The informal economy includes all informal productive activities carried out by workers or economic units within the general production boundary; informal productive activities encompass informal labor inputs and informal production.
  - The informal sector is a subset of the informal economy: household unincorporated market enterprises and associated labor input not formally recognized by government authorities because they are not registered for tax or similar purposes.
- New informal activities have emerged with digitalization (for example, informal taxi drivers), often associated with lower and uncertain income for workers.
- The 2008 SNA recognized the importance of informal activities and integration into national accounts but did not provide a comprehensive statistical framework; since 2018, the ILO has developed a comprehensive and improved framework summarized in the chapter.
- Distinction from the non-observed economy: the non-observed economy is conceptually distinct and includes activities not captured in regular statistical enquiries; overlaps exist but concepts serve different purposes. The chapter focuses principally on the informal economy, with a concluding section on the non-observed economy and its relation to informality.
- The Introduction summarizes the chapter’s structure.

*Prepared by Brent Moulton (SNA lead) and Patrick Quill (BPM lead) and cleared by Pete Harper and Carlos Sánchez-Muñoz (SNA and BPM Project Managers).*

### B. Framework for the Informal Economy
- Overarching concept: all informal productive activities carried out by workers or economic units within the general production boundary.
- Informal productive activities are defined as productive activities carried out by persons or economic units that are—in law or in practice—not covered by formal arrangements; the framework recognizes two linked perspectives: workers and economic units.
- Assignment of economic units:
  - All non-household economic units (corporations, general government, and NPISHs) are assigned to the formal sector as they are formally recognized producers.
  - Households are assigned to the formal sector if production is through a household unincorporated market enterprise that is registered for tax or similar purposes and formally recognized.
  - Households are assigned to the informal sector if they undertake production mainly intended for the market through an unregistered household unincorporated market enterprise (not registered for tax or similar purposes). The ILO criterion that the informal sector comprises production mainly intended for the market is close to the SNA requirement that all or most output be sold.
  - Households producing goods and services mainly intended for own final use are assigned to the household own-use production sector, which is included in the informal economy but not part of the informal sector.
- Treatment and properties of household unincorporated market enterprises:
  - Such enterprises may lack complete accounts; assets may not be separable between household consumption and production roles.
  - Informal household unincorporated market enterprises = informal enterprises; all production within the informal sector is part of the informal economy.
  - The informal sector includes agricultural production of informal enterprises.
  - Enterprise size is not a criterion for classifying household unincorporated market enterprises as informal.
  - A single household can carry out multiple informal market production activities; such activities should be identified as separate informal enterprises if feasible.
  - All labor inputs in the informal sector are informal.
- Household own-use production sector:
  - Includes households producing goods and services mainly for own final consumption, informal or temporary NPISHs, and direct volunteer work.
  - Extends beyond the SNA production boundary by including production of services by households for own use, direct volunteering, and services produced by informal NPISHs.
  - Production of informal or temporary NPISHs and direct volunteer work is always informal.
  - Housing services of owner-occupiers are by convention excluded from the informal economy.
  - Household own-use production—other than housing services of owner-occupiers, informal or temporary NPISHs, and direct volunteering—that is undertaken using household labor is mostly informal, though exceptions are possible.
- Formal sector production and informal labor inputs:
  - Production/international trade by formal economic units, including undeclared and underdeclared production/international trade, is not part of the informal economy (but may be accounted for as non-observed production activity / international trade).
  - Formal economic units can use informal labor inputs; such labor inputs are part of the informal economy and are compiled from a labor statistics perspective.
- Illegal activities:
  - The SNA’s general guidance on illegal activities applies; most, but not all, illegal productive activities would be part of the informal economy if informality principles are applied.
  - Production of goods and services whose sale, distribution, or possession is forbidden by law are by convention excluded from the informal economy; statistics on informality should be supplemented with measures of such illegal productive activities.
  - Production that is usually legal but becomes illegal when carried out by unauthorized producers should be included in the informal economy.
- The chapter will incorporate IE.1 Guidance Note Boxes and Figure showing scope and a decision tree to identify informal productive activities.

### C. Digitalization and Informal Cross Border Flows
- Digitalization:
  - Digitalization has penetrated many aspects of economic activity and raises concerns about possible mismeasurement.
  - Some new types of informal economic activities use digital technologies and create jobs that may be formal or informal; many are dependent contractors (treated in Section D).
  - Dependent contractors facilitated by digitalization typically depend on formal enterprises (possibly non-resident) that provide a digital intermediation service; assignment of the household unincorporated market enterprise to formal or informal sector uses the usual criteria.
- Informal cross-border flows:
  - Problems arise in external sector statistics when transactions outside the scope of regular statistical enquiries and data collection systems are omitted; omissions may be related to informal economy activities or to activities by formal enterprises with formal labor inputs.
  - Examples: merchandise trade statistics may omit shuttle trade undertaken by household unincorporated market enterprises not covered by customs recording.
  - The informal economy framework can be used for external transactions including:
    - Informal cross-border transactions in goods (including shuttle trade and smuggling of legitimate goods by informal units).
    - Informal services (including tourism services such as room rental and informal restaurants and bars).
    - Remittances transmitted through informal channels; households may transmit income derived from the informal economy as remittances through formal or informal money transfer channels.
- Illicit financial flows:
  - Illicit financial flows should be distinguished from cross-border informal economy flows.
  - Four main types of activities can generate illicit financial flows: (i) tax and commercial activities, (ii) illegal markets, (iii) corruption, and (iv) exploitation-type activities and financing of crime and terrorism.
  - Illicit financial flows can emerge as illicit income generation or illicit income management.
  - Illicit financial flows should be distinguished from illegal transactions; illegal transactions are treated no different from legal transactions and are included in the balance of payments statistics framework.
  - Not all illicit financial flows are transactions; therefore, not all such flows would be recorded in macroeconomic statistics.
  - Flows arising from exploitation-type activities are not transactions and are therefore excluded from the balance of payments statistics.

### D. Informal Work
- Relation to ILO terminology:
  - The chapter introduces ILO definitions of job/work activity, independent workers, dependent workers, employment for profit, and employment for pay before defining informal employment categories.
- Categories of informal employment:
  - Employers are in informal employment if they operate and own or co-own a household unincorporated market enterprise.
  - Dependent contractors:
    - Own and operate household unincorporated market enterprises and have contractual arrangements of a commercial nature (but not a contract of employment) to provide goods or services for or through another economic unit, as described in IE.1 GN, paragraphs 50–51.
    - Many new forms are facilitated by digitalization.
    - Dependent contractors are in informal employment if they:
      - do not own or co-own a formal economic unit and are not registered for tax and thereby do not have a formal status, or
      - own or co-own a formal economic unit or are registered for tax and thereby have a formal status but without effective access to formal arrangements intended to reduce the economic risk related to the job.
  - Employees are in informal employment if their employment relationship is not in practice formally recognized by the employer in relation to the legal administrative framework and not associated with effective access to formal arrangements such as labor legislation, social protection, income taxation, or entitlement to employment benefits; this includes domestic staff when there is no formal arrangement.
  - Contributing family workers are in informal employment if their job is not in practice formally recognized in relation to the legal administrative framework.
- Partly informal productive activities and formal jobs:
  - All labor inputs of workers in informal jobs and informal work activities are informal.
  - Workers in formal employment can also provide informal labor inputs to economic units in the formal sector (for example, when income and hours worked are not declared).
- Other informal forms of work:
  - Direct volunteering is always informal.
  - Organization-based volunteer work is informal if carried out for an informal NPISH or an informal sector enterprise, or for or through a formal economic unit when the volunteer is not covered by formal arrangements that protect the worker and regulate the activity.
  - Unpaid trainee work is informal if not effectively covered by formal arrangements that aim to protect the worker and facilitate and regulate the work.
  - Own-use production work is informal if not effectively covered by formal arrangements that aim to promote or facilitate the work and protect and regulate the worker.
- The chapter will include Tables 2 and 3 from the appendix of the ILO’s “Statistics for the informal economy” showing informal productive activities by persons and informal/formal jobs by status and sector.

### E. The Non-Observed Economy
- Definition and relation to informality:
  - The non-observed economy is the extent of economic activity missing from statistical data collections and administrative sources, including some illegal activities; it overlaps with but is not the same as the informal economy.
- International accounts implications:
  - International transactions (and possibly positions) missing from statistical data collection and administrative sources constitute non-observed elements of the international accounts; omissions may relate to informal economy activities or to undeclared/underdeclared production and trade by formal units.
  - Merchandise trade statistics may omit items traded by formal enterprises.
- Measurement and estimation:
  - Assembling national accounts, especially using the supply and use framework, highlights missing information including illegal activities; balancing supply and use tables may estimate some non-observed activity but may not capture all of it.
  - Techniques in Measurement of the Non-Observed Economy: A Handbook are useful for measuring both the non-observed economy and some aspects of informal enterprises.

### F. Guidelines, Studies, and Handbooks on the Informal Economy
- The section reviews and cites guidelines, studies, and handbooks on the informal economy intended to assist compilers of these statistics.

*Source: BPM7 Chapter 18/2025 SNA Chapter 39. Informal Economy: Annotated Outline — Approved/Final Version (prepared by Brent Moulton and Patrick Quill).*

### Section 2

### bpm7-chapter-182025-sna-chapter-39-informal-activities-annotated-outline - Section 2

### A Introduction
- Purpose of measuring the informal activities: informing policy decisions.
- Brief introduction of key concepts.
- Emergence of new types of informal activity.
- Development of a new framework for measuring the informal economy.
- Distinction between the informal economy and the non-observed economy.
- Structure of the Chapter.

### B Framework for the Informal Economy
- Definitions referring to informal units (informal sector), informal workers, and the informal economy incorporating new guidance per GN IE.1.
- Set out the formal sector, the informal sector, and the household own-use production sector and their links to informal activities.
- Provide guidance on measurement of informal production and labor inputs in each sector.
- Per GN IE.1, clarify that unlike the SNA, the informal economy generally excludes the production of goods and services whose sale, distribution or possession is forbidden by law.
- Incorporate Boxes 1 and 2 and Figure 1 from GN IE.1 providing a tabular framework and a decision tree to identify informal productive activities.

### C Digitalization and Informal Cross Border Flows
- Discuss the role of digitalization in the emergence of new types of informal activities.
- Discuss informal trade and cross-border flows.
- Discuss illicit cross-border financial flows.

### D Informal Work
- Introduction to ILO concepts of work and employment.
- Categories of informal employment (including a discussion of dependent contractors and partly informal productive activities in relation to formal employment).
- Incorporate Tables 2 and 3 from the Appendix of “Statistics for the informal economy”.
- Categories of informal forms of work other than employment.

### E The Non-Observed Economy
- Definition and background.
- Relationship between the non-observed economy and the informal economy.
- Discussion of non-observed transactions in the international accounts.
- The role of supply and use tables and use tables in identifying some non-observed production.

### F Guidelines, Studies, and Handbooks on the Informal Economy
- Discussion of various guidelines, studies, and handbooks that provide guidance on compiling statistics on the informal economy or on the non-observed economy.
- Example references and guidance cited in Annex II of the Guidance Note include:
  - reports of the BOPCOM Task Force on the Informal Economy;
  - the IMF paper, “Measuring the Informal Economy”;
  - ILO reports and guidelines;
  - ICLS resolutions;
  - Conceptual Framework for Statistics on Informal Economy.
- Other relevant guidance or studies that could be cited: proceedings and papers of the Delhi Group on Informal Sector Statistics.

### References and Consultations (selected items preserved verbatim)
- GNs IE.1   Guidance notes are posted at List of Guidance Notes for the 2008 SNA Update (unstats.un.org).
- ILO, “Statistics for the informal economy,” report for discussion at the Tripartite Meeting of Experts in Labour Statistics on the Revision of the Standards for Statistics on Informality, (Geneva, 7–10 February 2023), https://www.ilo.org/wcmsp5/groups/public/---dgreports/---stat/documents/meetingdocument/wcms_865498.pdf.
- ILO, “Conceptual framework for statistics on informal economy,” room document to support the discussions at the Meeting of Experts on Labour Statistics in Preparation for the 21st International Conference of Labour Statisticians (Geneva, 7–10 February 2023), https://www.ilo.org/wcmsp5/groups/public/---dgreports/---stat/documents/meetingdocument/wcms_867429.pdf.
- Key Stakeholders Consulted: System of National Account and Balance of Payments Manual editors, International Labour Organization, Joint Informal Economy Task Team, AEG, BPTT.

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_Source: https://www.imf.org/-/media/files/data/statistics/bmp7/final-annotated-outlines/bpm7-chapter-182025-sna-chapter-39-informal-activities-annotated-outline.pdf_