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January 1984, Vol. 107, No. 1
The "underground economy"
and BLS statistical data
Over the past several years, a large number of books and articles on an "underground economy," have appeared 1 There is no generally agreed-upon definition of the activities that constitute this "irregular economy," but a common element is the absence of normal business recordkeeping, orif records are kepttheir unaccessibility, concealment, or falsification for tax avoidance or other reasons. Because the existence of an underground economy usually implies the existence of unrecorded economic activity, the idea has evolved that government statistics may be missing a significant portions of economic activity.
If data are deficient because of the existence and growth of an underground economy, then we may have erroneous ideas about economic trends in employment, output, productivity, and inflation. Establishing the existence of a subterranean economy, however, does not necessarily prove that government statistics are invalid. To determine whether a particular government statistic is affected also requires careful consideration of the way the data are gatheredthe nature of the survey, what is known about responses to the survey, and the relation between economic activities that may be covered by the survey and those that are not. Our review of the literature on the underground economy has convinced us that many of the critics of government statistics have simply not taken this necessary step. In many cases, they have done little more than form some estimate of the size of the underground economy and then jumped to the conclusion that various pieces of government statistical information must be in error.
This excerpt is from an article published in the January 1984 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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1 An annotated bibliography of this literature will be included with the reprint of this article.
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