IDEAS home Printed from
   My bibliography  Save this article



  • Ayaz KHAN*
  • Samina KHALIL**



Informal economy is an observable issue around the globe. Researchers of both the developed and developing countries are continuously investigating its different dimensions (size, determinants, etc). The current study is an attempt to estimate the real size of informality (underground economy) in Pakistan. For its estimation the real factors of economy like employment level, political stability, tax to GDP ratio and cost of working in informal economy are used, over a period (Time series) of 1972 to 2010. HP-Prescott filter method is utilized for obtaining the potential GDP and actual GDP series from the estimated GDP which is estimated through Feasible Generalized Least Square (FGLS)1 and then from these series informal GDP is estimated. About 71 per cent of the informality was found, in the case of Pakistan economy. The finding suggests that combating informality, the factors taken must be targeted properly.

Suggested Citation

  • Ayaz KHAN* & Samina KHALIL**, 2017. "THE REAL SIZE OF UNDERGROUND ECONOMY: A Case of Pakistan," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 27(1), pages 89-100.
  • Handle: RePEc:pje:journl:article27sumv

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Muhammad Farooq Arby & Muhammad Jahanzeb Malik & Muhammad Nadim Hanif, 2010. "The Size of Informal Economy in Pakistan," SBP Working Paper Series 33, State Bank of Pakistan, Research Department.
    2. Alm, James & Yunus, Mohammad, 2009. "Spatiality and Persistence in U.S. Individual Income Tax Compliance," National Tax Journal, National Tax Association;National Tax Journal, vol. 62(1), pages 101-124, March.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pje:journl:article27sumv. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Samina Khalil). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.