As we learned earlier in the semester, GDP is the sum of all goods and services produced within a country’s borders over a given time. Some underground/black market activities are hard to measure due the secretive nature of those markets, but drugs and prostitution do represent goods and services, and so should be counted in GDP.
Last summer the European Union, in an attempt to harmonize the collection and analysis of data in various countries, ruled that all countries in the common area should include the value of prostitution, the production and consumption of illegal drugs, and black market sales of cigarettes and alcohol in their GDP statistics in order to produce a more complete picture of economic activity in each country as well as to have statistics that were more directly comparable between countries.
So what countries’ GDPs received the biggest boost from the inclusion of these illegal activities? As the chart below of the estimated impact on various countries’ GDPs shows, let’s just say that some countries will make you an offer you can’t refuse. – Victor