Reining in Brazil's informal economy

Why is Brazil's economic growth limited to 3 or 4% a year while fellow emerging giants China and India are increasing their GDPs by 7 to 10%? A major, often overlooked reason is Brazil's huge informal economy, which inhibits productivity, discourages business investment, and reduces the po...

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Bibliographic Details
Published in:The McKinsey quarterly 2005-01 (1), p.18
Main Authors: Capp, Joe, Heinz-Peter Elstrodt, Jones, William Bebb
Format: Magazinearticle
Language:English
Subjects:
Economic growth
Economic policy
Grey markets
Informal economy
Online Access:Get full text
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Summary:Why is Brazil's economic growth limited to 3 or 4% a year while fellow emerging giants China and India are increasing their GDPs by 7 to 10%? A major, often overlooked reason is Brazil's huge informal economy, which inhibits productivity, discourages business investment, and reduces the potential for growth. In fact, a study shows that Brazil's economy could grow by an additional 1.5% a year if the government followed the lead of other countries and launched a concerted effort to reduce the size of the gray market. In Brazil, the informal economy accounts for about 40% of the gross national income, a much bigger share than it claims in China and India.
ISSN:0047-5394