1. Experiences Informal Sector in National Accounts
Emmanuel NGOK
Statistician
Economic Statistics and National Accounts Section
EGM Informal Sector
11-14 January 2016 UNCC
Addis Ababa, Ethiopia

2. Outline of the Presentation
1- Introduction
2- Concepts and definitions
3- Surveys of Informal sector
4- Integration of Informal sector in National Accounts
5- Methods of integration
6- Conclusion

3. 1- Introduction (I)
The informal economy is often the origin of a large part of household income
Its measurement remains a major challenge
It is often faced with inadequate or no statistical data
Main questions:
What is the contribution of the informal sector in the GDP and to economic growth?
What is its place and role in the productive system of the country?
What is its contribution to the living standards of households across the income generated?

4. 1- Introduction (II)
Before the integration of the informal sector in national accounts, it is essential to understand the methodological principles which it is based; particularly to the following areas:
The method of compiling national accounts,
The concept of the informal economy and its implementation both in the statistical approach and its integration in the national accounts,
The concepts of production and economic units (establishment and institutional units) according to the SNA.

5. 2- Concepts and definitions
The concept of informal sector has evolved from 1993 SNA to 2008 SNA
In 1993 SNA the informal sector was defined as a group of establishments
With 2008 SNA, we talk about the informal economy which includes the informal sector, informal employment, non-market household production

6. 2- Concepts and definitions
SNA uses definition of ILO The informal sector described as a set of units producing goods or services for - primarily - to create employment and income for the people concerned ... The concept of informal sector activities should be distinguished from the activities of the non-observed or underground economy

7. 2- Concepts and definitions
Evaluation of informal sector must be done in an integrated manner by using both the survey approach and national accounts approach. These approaches are complementary because the survey on the informal sector serves to specify the production function necessary for the compilation of industries accounts

8. 2- Concepts and definitions
Clarifications of 2008 SNA:
Informal sector and institutional sector
In the SNA, the sectors consist of complete institutional units
in the context of the informal sector only productive activities are concerned
Company and establishment
Company: complete set of accounts
Establishment only fewer data are available

9. 2- Concepts and definitions
The scope of the informal economy is flexible over time and space since informal depends on the legal and social conditions in each country. This makes the comparability of informal difficult. The Delhi Group proposed a total of 10 recommendations to help ensure minimal data comparability internationally

10. 2- Concepts and definitions
Informal employment and informal economy
ILO definition: formal employment as employment in conditions that bring associated benefits such as paid leave and pension rights.
All other forms of employment, including self-employment, are considered informal
It is possible for formal units to have informal employees.
There is a distinction between an employment and an employee; an employee may be able to have several employment (jobs).

11. 3- Surveys of Informal sector
For the four possible approaches (indirect approach, household surveys, establishment surveys, mixed surveys), two are mainly used for the measurement of informal sector:
Establishment surveys
"mixed" surveys, which are conducted in two stages: the first phase consists of a basic household survey, a second phase consists of informal survey

12. 3- Surveys of Informal sector
Once the measurement methods are sufficiently mastered, it is necessary to stabilize it in the country In order to conduct analyzes on the evolution of the informal sector: we need to use the same definition At the general harmonization between countries, it seems difficult for now to seek to adopt the same concepts and definition of informal units Regional harmonization can however be sought.

13. 4- Integration of Informal sector in National Accounts
SNA is based on classifications aimed to submit partition on various economic domains: institutional units, activities, products, operations, assets, etc. SNA has no partition in which we can put directly the informal sector. How to bring up the formal sector in this framework?

14. 4- Integration of Informal sector in National Accounts
The national accountant must first begin by defining the economic purpose "informal sector" in order to situate it in relation to other economic facts. According to the 2008 SNA, the informal sector belongs to the family of economic actors called “establishments “including set of individual companies which are market establishments depending to households.

15. 4- Integration of Informal sector in National Accounts
The informal sector considered as a group of establishments belonging to the household sector, is part of the national economy

16. 5- Methods of integration
Method for measuring the informal economy Method must go through an integrated compilation of all accounts of the national economy Results of a survey on the informal sector does not isolate the whole informal economy, you need to be able to position these results among other market establishments The employment matrix is at the heart of the proposed method process and a prerequisite

17. 5- Methods of integration
The compilation of the employment matrix is done in three main steps: First step: The framing of the employed population To make a distribution of employed persons according to their status in the first employment, and economic activity which they carry. It is a matrix called "demographic" that corresponds to the employment supply

18. 5- Methods of integration
Second Step: Comparison of employment data
After the first stage, we have an employment matrix based on the first employment
To this we must add a second matrix on supplementary employment eventually occupied by the same people
These employment are known by economic statistics that come from production units. It is the matrix called "economic" corresponding to the employment demand

19. 5- Methods of integration
Second Step (II)
The difference between the two matrices gives all employment without economic information including production
We must therefore provide a breakdown of the balance for different subsets of the national economy
These two matrices must have the same structure since it be necessary to compare them to generate a single matrix.

20. 5- Methods of integration
Third Step: Employment, wages and workload
Should be offered to non-production employment in the present economic sources. Thus we must have some indicators include:
Salary (per worker) depending on the activity and status of employment;
Amount of associated work (hours, days or full time equivalent) to apply productivity ratios.

21. 5- Methods of integration
Integration of the informal economy in national accounts
SNA classifications are not enough to develop a rigorous industries accounts
Thus we must first differentiate the available sources and different production functions
Therefore the introduction of modes of production for each activity in the compilation of industries accounts

22. 5- Methods of integration
In summary, the informal economy evaluation method is done in six main steps:
Implementation of the available elements (identification and exploitation of available sources);
Arbitration on employment;
Methods by modes of production;
Implementation of data according to the chosen format;
Preliminary compilation of industries accounts;
Iterative arbitrations in the SUT

23. 5- Methods of integration
Implementation of data according to the chosen format
In the base year
1. Do the link table between the national accounts activities classification and activities classification used by the survey;
2. Estimate globally the active population;
3. Look for distribution indicators or employment share from surveys or censuses; 4.

24. 5- Methods of integration
In the base year (II) 4. Share the active population using these indicators, by industries of national accounts, mode of production and employment status; 5. Compile the employment matrix.

25. 5- Methods of integration
In the current year
1. Estimate globally the active population of the year
2. Share this active population (current year) by industries of national accounts and status in employment according the structure of the previous year while using various indicators provided by active population in the previous year

26. 5- Methods of integration
In the current year (II) 3. Share the active employed population based on these indicators and by industries of national accounts 4. Compile the employment matrix

27. 6- Conclusion
The informal economy can only be located in relation to the whole production; so avoid taking it for itself This approach is necessary, but it is not sufficient to undertake a satisfactory measurement, because we must also position themselves in relation to the whole production system, both from a conceptual point of view and in reference to the potential of local statistics

28. 6- Conclusion
The approach used in national accounts to measure the informal sector should be integrated because it allows the linking of sources actually available in the country For a comprehensive coverage of GDP, national accountants should explore the non-observed economy that goes beyond informal sector and find methods to reduce its size

29. Thank you for your attention !!!