The Relationship between Informal Economy and GDP Growth: A Study on South-Asian Developing Countries

Abstract

The informal economy has gained increased attention of the policy-makers and development practitioners, especially in the context of South-Asian developing countries. Though measuring the informal economy is difficult, statistics shows the rate of employment creation by the informal sector in this region is higher than the rest of the world. But the GDP growth rate in this region is still emerging in the global economic competition that indicates its effectiveness in the South-Asian region. The study was carried out to identify the relationship between the informal economy and GDP growth rate in South-Asian developing countries. The target population was economies of 8 South-Asian countries, which were also taken as the sample size. Data was collected from secondary sources and analyzed using multiple regression analysis. Results indicated that there is a significant positive relationship between the informal economy and GDP growth rate in South Asian developing countries. Therefore, it is necessary for the policy-makers and development practitioners in this region to give emphasis on the informal sector entrepreneurs to ensure constant economic growth and development.