ESTIMATING THE 2ND ECONOMY IN TANZANIA

The official National Accounts of Tanzania suffer from two serious weaknesses: incomplete coverage as well as inaccurate estimates of the activities covered. This arises because many of the activities, especially those in the informal sector, are either misreported or underrecorded. Often, however, the required information is deliberately concealed from public authorities either because the agents are involved in illegal (black market) activities or where such (parallel market) activities are legal, there is a deliberate intention to evade government controls. The misstatement and omission of these ''second economy'' activities from official statistics imply that macroeconomic measures are not robust enough for meaningful analysis, development planning, policy and program formulation. This paper attempts to estimate the magnitude of, and changes in the second economy in Tanzania, to establish the extent to which official statistics misstate actual production of goods and services.