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Impact of Informal Economy on Economic Diversification: BVI Perspective

Explore the informal economy in the British Virgin Islands, its impact on economic diversification, and the challenges it poses to the formal economy. This article examines the various sectors of the informal economy such as tourism-related businesses, construction jobs, and illicit activities like gambling and drug sales. It also discusses the population, GDP, and per capita income of BVI, highlighting the prevalence of service-based industries. The analysis concludes with policy recommendations emphasizing the need for better data collection to understand the informal economy's true effects on formal economic structures.

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Impact of Informal Economy on Economic Diversification: BVI Perspective

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  1. The Impact of The Informal Economy on Economic Diversification in Small States – The BVI Perspective Hon. Marlon A. Penn - MP British Virgin Islands

  2. Classic Definition of Informal economy “The term “Informal Economy” thus refers to all economic activities by workers and economic units that are – in law or in practice – not covered or insufficiently covered by formal arrangements.”

  3. BVI’s Informal Economy • Unregulated/Legal Activity • Tourism related businesses/Jobs • Construction Jobs • Undocumented /Illegal Activity • Gambling • Prostitution • Sale of Illicit Drugs

  4. Snap Shot of BVI’s Economy • Population of Approximately 27,000 • Mainly Service Based Economy • Financial Services • Tourism • Construction Activity • Labour Force 13,000 • GDP of $951,823 • Per Capita $38,500

  5. Informal Economy’s Impact on Economic Diversification • Conclude that the Informal Economy’s Impact to Economic Diversification is Negligible or has more of an Adverse Impact on the Formal Economy. • Contributing Factors • Amount of Persons operating in the Informal Sector is small • Tax System (Payroll Tax system, first $10,000 exempt) • Gambling (The Purchase of Lottery Tickets) • Sale of Illicit Drugs (Especially Marijuana which is mostly used for recreational proposes)

  6. The Policy Maker’s Perspective • A more coordinated effort for the collection of data on the informal economy is needed, to understand the true impact of this sector to the formal economy.

  7. Thank You

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