C3 [Hallak Neto & Ramos 2014] - A ENO no Brasil vs SNC

 

ANALYSIS OF ARTICLE

Article summarizes concepts presented on the OECD Handbook for NOE and provides details on the estimate for Brazil from 2000 to 2009.

 

 

 

Section 1 (Introduction)

Authors tailor the NOE definition to encompass the families’ productive activities effected informally or for self-consumption, not formally registered, eventually illegal, or not covered by the official statistics.

Brazil’s SNA incorporated new methodologies from 2007 allowing for a better NOE estimation.

 

 

Section 2 (The Non-Observed Economy NOE)

The article explains how the NOE derives from the SNA (System of National Accounts) limitations on capturing the full information, resulting in an underground statistics composed by undercoverage of areas, lack of data or underdeclared data. SNA improvements over time tend to reduce NOE’s size.

It also highlights the importance to have a measure of the NOE not to work with an undersestimated GDP, not only on its absolute value, but also on the trends, as the NOE may have a different behaviour (if not inverse) from the measured economy.

Finally, the NOE tends to be higher in developing countries because of (1) higher informality and less enforcement and (2) better SNA and therefore lower NOE.

 

 

Section 3 (NOE and Production Boundary):

SNA’s Production Boundary consist on the rules that define what should be included in the production of goods and services. The following flow diagram clarifies what’s included or not in the production boundary, as per the SNA-2008.

 

  

Section 4 (NOE and its components) –

The article uses the categories defined by the OECD:

-          Informal sector

-          Self-consumption of families

-          Illegal

-          Under declared

-          Stats defficiency

 

 

 

Section 5 (Methods to evaluate NOE)

The article presents the main methods used to estimate the size of the NOE for a country: (a) statistics compilation and (b) modelling techniques

For statistics compilation:

-          Direct – results from surveys;

-          Indirect:

o   Based on offer – labor, materials for production, fixed capital, etc.

o   Based on demand

o   Based on the flow of products – considering offer and demand of products

 

For modelling techniques: macroeconomic models such as monetary (e.g., stock and flow of money) or global indicator (e.g., electricity consumption)

For Brazil, NOE estimate is based on:

-          Families – represented by the informal economy estimate made by the IBGE

-          Firms – adjustment between offer and demand tied to under-declaration and under-coverage.

 

 

 

Section 6 (Final Remarks)

The article reinforces the concepts and highlights the results for Brazil in Section 5.