Economic Consequences of Conflict: The Rise of Iraq's Informal Economy
Abstract
Iraq's informal economy has increased considerably since April 2003. The biggest increases have been in the areas of small-scale urban services and criminal activity. Smaller increases have occurred in agriculture and various small scale industries. A safe estimate of the current size of the informal economy is around 65% of GDP, although this may be a bit conservative. Approximately 80% of the labor force is engaged in informal activity, if one assumes that many workers listed as unemployed are really using the informal economy as a coping strategy until formal sector jobs appear. Higher rates of economic growth, or even a lessening of the insurgency with stepped-up reconstruction efforts, are not likely to result in a significant decline in the size of Iraq's informal economy in the near term. Instead, there are a number of more policy-centered measures available to stop and reverse the expansion of the informal economy. These include improved governance, especially improving the rule of law and anti-corruption measures. Specific tax policies, together with macroeconomic stability would also provide incentives for individuals to more into more formal activities. This strategy might be supplemented with an expanded social net designed to provide short run security, especially for two of the more vulnerable groups: women and children.
Document Details
- Document Type
- Technical Report
- Publication Date
- Dec 01, 2006
- Accession Number
- ADA519781
Entities
People
- Robert E. Looney
Organizations
- Naval Postgraduate School