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March 18, 2025UNDERGROUND ECONOMY, 2023 Statistics Canada has updated its estimates for the value of the underground economy to the 2021 reference year. The underground economy is defined as “consisting of market-based activities, whether legal or illegal, that escape measurement because of their hidden, illegal or informal nature.”
In Nova Scotia, the underground economy is estimated to have amounted to 2.9% of provincial GDP in 2023, a total of $1.72 billion. Nova Scotia's underground economy as a share of GDP is the second highest among provinces after Prince Edward Island (3.0%) and above the national average of 2.5%. Underground economy as a share of GDP was lowest in Newfoundland and Labrador (1.5%) and Alberta (1.7%).
Expenditures by households generated the largest amounts of GDP from the underground economy. Consumptions expenditures of $892 million as well as investments in residential structures of $727 million contributed the most to Nova Scotia's underground economy. This was followed by $183 million in exports generated from underground activity. To arrive at the $1.72 billion estimate of total GDP in Nova Scotia's underground economy, Statistics Canada's subtracts the $78 million in imported products that were prompted by underground economic activity.
The largest amount of income generated as a result of Nova Scotia's $1.72 billion in underground economy GDP was employee compensation ($789 million), followed by net operating surplus of corporations ($500 million) and net mixed income of unincorporated businesses ($415 million). The largest contributors to business income generated by underground activities were construction ($243 million for incorporated businesses and $120 million for unincorporated businesses) and skimming ($165 million for incorporated businesses and $102 million for unincorporated businesses). Skimming refers to overstated expenses or other failures to declare business income.
In Nova Scotia, residential construction accounts for over 40% of estimated underground economy GDP. The next largest contributors to Nova Scotia's underground economy were: real estate leasing, retail trade, accommodation/food services, manufacturing, professional/technical services, personal/repair services, agriculture, health care/social assistance and fishing.
Nova Scotia's underground economy has remained stable as a share of GDP since 2007, fluctuating between 2.7% and 3.0% of GDP over this period. There have been notable recent declines in underground share of GDP for British Columbia and Québec, which used to have the highest shares of underground activity. Alberta and Newfoundland and Labrador have consistently reported the lowest share of GDP from underground activities.
Notes: Statistics Canada cautions that data on the underground economy are by definition unobserved and estimates are prepared using assumptions, indicative measures and indirect methods. The estimates presented represent an upper bound. Users should interpret the data carefully and should not add estimates of underground economy to conventionally-measured GDP.
Source: Statistics Canada. Table 36-10-0682-01 Underground economy, by expenditure-based gross domestic product component, current dollars; Table 36-10-0683-01 Underground economy, by income-based gross domestic product component, current dollars; Table 36-10-0684-01 Underground economy, by industry, current dollars; Methodology for measuring the underground economy by province and territory.
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