The Economy You Can’t See: KNI Launches Unit to Model Europe’s Informal Sector

The Kingsman National Institute, in a major new cross-faculty initiative, has formally launched a research unit dedicated to one of the most complex and defining challenges in European economics: the measurement and modeling of the informal economy.

This new unit, operating from within our Kolonaki Forum for Economic Policy (KFEP), is a direct response to a fundamental, and often unacknowledged, flaw in modern economic analysis. For decades, economic policy—from Brussels to Athens—has been formulated using official national data: declared GDP, taxable incomes, and registered employment. In Greece, and across the Southern European economies, this reliance on “official” data means policymakers are effectively blind. They are attempting to steer an economy whilst ignoring a vast, dynamic, and unmeasured sector that may account for a significant portion of all activity.

The “Informal Economy & Data Synthesis Unit” (IEDSU) is therefore not just another economic research group. It is a mandatory collaboration between three distinct, and often conflicting, KNI faculties. This is the “Athenian Synthesis” applied to a problem of immense practical importance.

The initiative is co-chaired by faculty representing this necessary “three-legged stool”:

1. The Economic Theory (KFEP): Dr. Eleni Zografos, our Reader in International Trade and Development, will lead the economic framework. Her team is tasked with asking what “value” and “production” mean outside of a formal, taxable contract.
2. The Data Science (AIL): Dr. Matic Novak from the Aegean Informatics Laboratory (AIL) will lead the computational component. His team is tasked with the core challenge: how do you measure something that is, by definition, designed to be invisible?
3. The Legal & Ethical Governance (PPL): Professor Zofia Kaczmarek, Professor of Jurisprudence, will lead the governance pillar. Her team’s involvement is not optional; it is a mandatory brake on the data-gathering process.

“The traditional tools of economics have failed us,” Dr. Zografos stated at the unit’s launch. “Our models for taxation, social welfare, and trade are based on a fiction—the fiction that all meaningful economic activity is captured by a government spreadsheet. This new unit acknowledges the ‘imperfect’ reality. We are not just trying to estimate the size of the informal sector; we are trying, for the first time, to understand its dynamics.”

The innovation, and the central friction of the project, lies in Dr. Novak’s data-gathering methodology. The IEDSU will not be using official tax or employment data. Instead, the AIL team is building a sophisticated, AI-driven model to correlate high-resolution “proxy data”—data streams that are not economic on their own, but which tell a powerful story when combined.

These proxies include:

• Energy Consumption: Analysing granular, anonymised electricity use from municipal grids, identifying industrial or commercial consumption patterns in areas with no corresponding registered businesses.
• Wastewater Analysis: In collaboration with our Life Sciences faculty, the unit will analyse wastewater for specific chemical tracers—such as solvents from undeclared manufacturing or chemicals from unregistered service businesses—to map non-official production.
• Logistics & Mobility Data: Correlating commercial transport movements and satellite night-light data with declared business locations to identify “dark” logistics hubs.

This is where the project’s necessary tension arises. The moment Dr. Novak’s team succeeds in “seeing” the invisible, they have also created a potentially terrifying new surveillance tool.

This is the non-negotiable role of Professor Kaczmarek’s PPL team. “This is not, and will not be, a tool for prosecution,” Professor Kaczmarek stated unequivocally. “The legal and ethical team is embedded in the project to ensure that every analytical model is built on a foundation of data anonymity and aggregation. Our role is to force our engineering colleagues to justify their methods before they are built, ensuring that the goal remains academic understanding, not individual-level surveillance.”

The unit’s primary goal is to build a “Dynamic Model” that provides policymakers, for the first time, with a real-time dashboard of the true economy, not just the declared one. This will allow for far more honest and effective policymaking. It will help answer critical questions: If you change the VAT, what is the real impact on economic activity, not just on tax receipts? If you provide a new social benefit, how does it actually affect household incomes in sectors that are off-the-books?

This initiative from the Kingsman National Institute is difficult, computationally complex, and ethically fraught. It forces our economists to abandon their clean, comfortable datasets and our data scientists to have their methods constrained by our philosophers. It is, in short, exactly the kind of work we were built to do.