Formal and Informal Sectors in China and India

This paper discusses the estimation of a social accounting matrix that distinguishes between formal and informal activities for China and India for 2000 and 1998–99 respectively. Wage shares for formal/informal employment in China and net domestic product shares for organized/unorganized sectors in India are used as weights to calculate the size of the two sectors. The proposed methodology is a first step towards an integrated approach to account for the dualism of many economies in the developing world. The results can serve as data input for any policy-driven CGE model for developing countries.