Nepal: Informal economy, DGE method

The latest value from 2020 is 31.2 percent, an increase from 31.1 percent in 2019. In comparison, the world average is 28.16 percent, based on data from 156 countries. Historically, the average for Nepal from 1990 to 2020 is 37.11 percent. The minimum value, 31.1 percent, was reached in 2019 while the maximum of 44.4 percent was recorded in 1990. See the global rankings for that indicator or use the country comparator to compare trends over time.

Definition: This method of estimating the size of the informal economy is based on a Dynamic General Equilibrium model where economic agents can allocate time and effort in the formal and the informal sector. Their allocation decision is driven by model parameters such as government spending and taxation. The theoretical model is calibrated to arrive at a measure of the size of the informal economy. The estimate is put to further robustness tests. See Elgin and Oztunali (2012) for further methodological detail.