The Correlation between Shadow Economies and Economic Strength in North America

Aug 23, 2017
Scatter plot of shadow economies and GDP

In North America, the indirect correlation between economic strength and the strength of the shadow economy is very strong.  The United States and Canada have by far the largest economies and the smallest proportion of underground activity.


  • The correlation coefficient between per capita Gross Domestic Product (GDP) in Purchasing Power Parity (PPP) and shadow economies in North America is -0.88.
  • As economic strength increases in North America, the shadow economy decreases.
  • Mauritius has the smallest shadow economy and the largest per capita GDP PPP of the North American nations studied by the Global Foundation for Integrity (GFI).
  • Guatemala had the largest shadow economy of the North American nations studied by GFI.
  • Honduras had the smallest per capita GDP PPP of the North American nations studied by GFI.
  • Guatemala is the only North American country whose shadow economy adds up to over half of the economy as a whole.
  • The United States' GDP PPP is over ten times larger than Honduras'.


  • As always, correlation does not imply causation.
  • Anguilla, Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Bermuda, the British Virgin Islands, Cayman Islands, Cuba, CuraƧao, Dominica, Greenland, Grenada, Guadeloupe, Haiti, Martinique, Montserrat, Panama, Puerto Rico, Saint Kitts and Nevis, Saint Lucia, Saint Martin, Saint Pierre and Miquelon, Saint Vincent and the Grenadines, Sint Maarten, Turks and Caicos Islands, and the US Virgin Islands were missing data.
  • The GDP data is from 2016 while the shadow economy data is the average from 1999-2006.


The two largest economies, the United States and Canada, also have the two smallest proportions of shadow activity.  Although Trinidad and Tobago has the next largest GDP PPP, it's shadow economy as a percent of the overall economy is larger than four countries (Costa Rica, Mexico, Dominican Republic, and Jamaica) with a GDP PPP half its size.

There is a cluster of countries whose per capita GDP PPP is less than 10,000 international dollars and whose shadow economies all make up at least 40-something percent of the overall economy.

Jamaica is the only country that has a GDP PPP less than 10,000 international dollars whose shadow economy comprises less than 40 percent of its overall economy.

Country Codes

CRCosta Rica
DODominican Republic
SVEl Salvador
TTTrinidad and Tobago
USUnited States


Schneider, Friedrich, Andreas Buehn, and Claudio E. Montenegro.  2010.  "Shadow Economies All over the World: New Estimates for 162 Countries from 1999 to 2007."  The World Bank Development Research Group.

"Report for Selected Country Groups and Subjects (PPP Valuation of Country GDP)."  International Monetary Fund.

Filed under: Correlations