The Household Electricity Approach to measuring the size of the underground economy or black market of a country exploits the presumed relationship between household electrical consumption and a country's GDP. It assumes that undeclared economic activity still needs to use resources, such as electricity, to function. Since electricity consumption is generally well known it can be used as an indicator of economic activity that is not otherwise declared.
The household electricity approach was developed by Maria Lacko as a method to determine the size of the hidden economy in a country. Lacko’s primary focus within this approach was directed at the relationship between the household electrical consumption and Gross Domestic Product (GDP) of a country using regression analysis. Her research in this area was particularly focused on developing methodologies that would help to more accurately determine the prevalence of the hidden economy in transitionary countries such as the former Soviet bloc countries.
Read more about Household Electricity Approach: History, General Concepts, Formula, Advantages, Disadvantages, Criticisms
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