Underground Economy

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Definition of 'Underground Economy'

The underground economy, also known as the shadow economy, black market, or informal economy, is the part of a country's economy that is not taxed, monitored, or regulated by the government. It is estimated that the underground economy accounts for up to 20% of global GDP.

The underground economy can be divided into two main categories: legal activities that are not reported to the government, and illegal activities. Legal activities that are not reported to the government include things like cash-only businesses, bartering, and moonlighting. Illegal activities that are part of the underground economy include things like drug dealing, prostitution, and smuggling.

There are a number of reasons why people participate in the underground economy. Some people do it to avoid taxes, while others do it to avoid regulations. Still others do it because they are unable to find legal work.

The underground economy can have a number of negative consequences for a country. It can lead to lower tax revenue, which can in turn lead to reduced government spending on public goods and services. It can also lead to higher crime rates and increased social inequality.

However, the underground economy can also have some positive consequences. It can provide jobs for people who would otherwise be unemployed, and it can help to keep prices down for consumers.

The underground economy is a complex and multifaceted phenomenon. There is no easy way to eliminate it, but there are a number of things that governments can do to reduce its size. These include increasing tax enforcement, reducing regulations, and providing more opportunities for legal employment.

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