Black-the Literature on the Underground Economy
Background
The literature on the underground economy has avoided a common usage and has instead offered a plethora of appellations including: subterranean; hidden; grey; shadow; informal; clandestine; illegal; unobserved; unreported; unrecorded; second; parallel and black.[1] This profusion of vague labels attests to the confusion of a literature attempting to explore a largely un-chartered area of economic activity.
There is no single underground economy, there are many. These underground economies are omnipresent, existing in market oriented as well as in centrally planned nations, be they developed or developing. Those engaged in underground activities circumvent, escape or are excluded from the institutional system of rules, rights, regulations and enforcement penalties that govern formal agents engaged in production and exchange. Different types of underground activities are distinguished according to the particular institutional rules that they violate. Four specific underground economies can be identified: 1. the illegal economy, 2. the unreported economy, 3. the unrecorded economy, and 4. the informal economy.
The "illegal economy" consists of the income produced by those economic activities pursued in violation of legal statutes defining the scope of legitimate forms of commerce. Illegal economy participants engage in the production and distribution of prohibited goods and services. The black market is trade, goods in illegal activities, such as drug trafficking, arms trafficking, and prostitution.
The "unreported economy" consists of those economic activities that circumvent or evade the institutionally established fiscal rules as codified in the tax code. A summary measure of the unreported economy is the amount of income that should be reported to the tax authority but is not so reported. A complementary measure of the unreported economy is the "tax gap", namely the difference between the amount of tax revenues due the fiscal
The literature on the underground economy has avoided a common usage and has instead offered a plethora of appellations including: subterranean; hidden; grey; shadow; informal; clandestine; illegal; unobserved; unreported; unrecorded; second; parallel and black.[1] This profusion of vague labels attests to the confusion of a literature attempting to explore a largely un-chartered area of economic activity.
There is no single underground economy, there are many. These underground economies are omnipresent, existing in market oriented as well as in centrally planned nations, be they developed or developing. Those engaged in underground activities circumvent, escape or are excluded from the institutional system of rules, rights, regulations and enforcement penalties that govern formal agents engaged in production and exchange. Different types of underground activities are distinguished according to the particular institutional rules that they violate. Four specific underground economies can be identified: 1. the illegal economy, 2. the unreported economy, 3. the unrecorded economy, and 4. the informal economy.
The "illegal economy" consists of the income produced by those economic activities pursued in violation of legal statutes defining the scope of legitimate forms of commerce. Illegal economy participants engage in the production and distribution of prohibited goods and services. The black market is trade, goods in illegal activities, such as drug trafficking, arms trafficking, and prostitution.
The "unreported economy" consists of those economic activities that circumvent or evade the institutionally established fiscal rules as codified in the tax code. A summary measure of the unreported economy is the amount of income that should be reported to the tax authority but is not so reported. A complementary measure of the unreported economy is the "tax gap", namely the difference between the amount of tax revenues due the fiscal