Underground Economy - Explained
What is an Underground Economy?
Written by Jason Gordon
Updated at May 3rd, 2023
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What is an Underground Economy?
An underground economy, also known as a black market or informal economy, is an economy consisting of transactions that are not recorded, monitored, or regulated by the government or other regulatory authority.
Activities within an underground economy are often illegal or prohibited by law. Illicit trades, drug trades, illegal procurement of arms, human trafficking, exchange of stolen items, illegal prostitution and others are underground economy.
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How does an Underground Economy Work?
Here are the major points to know about the underground economy;
- Illicit trade transactions, illegal markets, black markets all form the underground economy.
- The underground economy is one in which transactions are carried out without the involvement of the government.
- Trades in this market are untaxed and unregistered.
Measuring the Underground Economy
The underground economy is not included in the annual statistical reports of GDP reports of a country's economy.
Economists attempt to estimate the size of underground economies by informal sampling of consumers regarding money spent.
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