Discussion Papers

No.531 Shedding Light on the Shadow Economy:A Nighttime Light Approach

by Kiyoyasu TANAKA and Souknilanh KEOLA

August 2015


Measuring the shadow economy is inherently difficult, but critical for understanding economic development. Using census data on formal and informal sectors in Cambodia, we document that 96.6% of non-farm establishments do not formally register with the government, and their sales accounted for 76.6% of total sales in 2011. We estimate a relationship between nighttime light and sales across regions separately for formal and informal firms for 2011, and estimate their past sales from changes in nighttime light for 1993-2010. Both formal and informal firms increased their estimated sales, and the share of informal sales increased from 68.8% in 1993 to 76.6% in 2011, suggesting that the informal sector increased quantitatively in both absolute and relative terms throughout the economic development of the Cambodian economy.

Keywords: Informal Sector, Informal Employment, Cambodia, Satellite Data
JEL classification: O17, E26, H26

PDF (393KB)

Supplementary Materials

  • Programs
    1. Constructing nighttime light dataset in Cambodia: R_code
    2. Estimating light adjustment factor: Stata_code1
    3. Estimating formal/informal activities: Stata_code2
  • Datasets
    1. Dataset for estimating light adjustment factor: Dataset1
    2. Dataset for estimating formal/informal activities: Dataset2

Please note that discussion papers are works in various stages of progress and most have not been edited and proofread and may contain errors of fact or judgment. Revised versions of these papers may subsequently appear in more formal publication series. The views expressed in this publication are those of the author(s). The IDE does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use.