Pakistan: Informal economy, MIMIC method

The latest value from 2020 is 34.6 percent, an increase from 34.2 percent in 2019. In comparison, the world average is 32.74 percent, based on data from 158 countries. Historically, the average for Pakistan from 1993 to 2020 is 35.48 percent. The minimum value, 33.8 percent, was reached in 2018 while the maximum of 36.8 percent was recorded in 2000. See the global rankings for that indicator or use the country comparator to compare trends over time.

Definition: The MIMIC model of the World Bank uses the following variables as determinants of the informal economy: 1) size of government, 2) share of direct taxation, 3) fiscal freedom index, 4) business freedom index, 5) unemployment rate and GDP per capita, and 6) government effectiveness. It proposes that the following variables are affected by the informal economy: 1) growth rate of GDP per capita, 2) the labor force participation rate, and 3) currency as a ratio of M0. These variables are used in a Structural Equation Model (SEM) with a latent variable that is a measure of the size of the informal economy. See, for example, Schneider, Buehn, and Montenegro (International Economic Journal, 2010).