SHADOW ECONOMY
Abstract
A clandestine economy, often referred to as a shadow economy or informal
economy, includes all economic activities that are not officially reported to power, such as
unregistered businesses, undeclared labor, tax evasion, and underground markets. It is
estimated that the hidden economy ranges from 15% to 30% of global GDP, depending on
the country and the level of informality in the local economic system. The pervasive
nature of the clandestine economy presents significant challenges for a developed and
developing economy, affecting economic policy, tax revenues, employment, and social
equality. While informal sectors provide significant employment opportunities, especially
in developing economies, they simultaneously prevent growth, reduce fiscal space, and
perpetuate inequality.
References
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World Bank. (2019). Informality and its impact on Global economic development.
IMF. (2021). Reducing the shadow economy: the role of digitization. International
Monetary Fund.
