Analysis of Correlations between Economic Growth (Rate of Real GDP) and the Underground Economy

Pripoaie Silviu, Pripoaie Rodica
unpublished
Analysis of performance of any economy involves the measurement and correlation of three basic elements: the rate of economic growth, the rate of inflation and unemployment rate. When the rate of growth (rate of real GDP) is high, the production of goods and services is growing and therefore increasing the number of jobs, decrease unemployment and raise living standards. If the economy is in recession phase, increasing fiscal pressure to ensure the necessary budgetary funds triggers complex
more » ... riggers complex economic mechanisms. Rules more strictly is that those who are not able to operate in the normal economy to slide towards the underground economy, and this not because he wants to tax evasion, but because they simply can not cope with new regulations. It is widely accepted in economic theory and practice the idea that reliability scale macroeconomic indicators of a country is affected by size of underground economy and the various tests made so far on this subject, focusing either on the social aspect or the economic or moral, or emphasizes the illegal or the edge of legality. This has led to various studies in this area do not provide comparable data or provide data to the contrary. Worldwide were put in place, however, some calculation methods provided that applied the same country and same period, the results are rarely consistent, sometimes even in fundamentally different. Analysis of performance of any economy involves the measurement and correlation of three basic elements: the rate of economic growth, inflation and unemployment. When the rate of growth (rate of real GDP) is high, the production of goods and services is growing and therefore increasing the number of jobs, decrease unemployment and raise living standards. The correlations between these elements has been the subject of various investigations in the field and the most important studies refer to: Relationship: economic growth-inflation-unemployment. The specialists argue that if the rate of growth of real GNP per capita would remain at 2% per year, then consider that per capita GDP would double every 35 years and so each generation can hope at life double than at present. If, however, GNP per capita would increase by 1% per annum will be needed 70 years for doubling the living. Should therefore take into account that small differences in the rate of economic growth over long periods can lead to large differences between the lifestyles of different successive generations. Relationship: economic growth-unemployment or Okun's Law. This analysis reflects the relationship between economic's growth rate and unemployment rate and is known as "Okun's Law" after the name of Arthur Okun of the Brookings Institution in the U.S.. According to this law "for each of the 2.2 percent real GDP growth, achieved in a year, the unemployment rate falls by one percent. This is a statistical and does not apply to any country, but only for U.S. and round the Okun did research. Such a statistical relationship can be deducted for each country separately, depending on the conditions of stage that through, and could be used in fundamental policy of strategic economic expansion to reduce unemployment to a convenient size.
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