informal - | Articles by Subject | Economics...

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ECONOMICS FOCUS Economics focus In the shadows Jun 17th 2004 From The Economist print edition The informal economy is neither small nor benign HAVE you ever paid cash to a builder for the odd home improvement? Or perhaps bought fruit from a street vendor who lacked the required hygiene certificate? Maybe you have employed a maid or a nanny, and have never got round to filing all that paperwork for social security? If so, then depending on your local laws you may have been participating in what economists call the “informal” or “grey” economy. In essence, the grey economy consists of legal activities whose participants fail to pay tax or comply with regulations. The informal (or “underground” or “parallel” economy) is often taken to mean something broader, including illegal activities such as prostitution and drug dealing as well, although there is no agreed strict definition. The grey economy is often thought of as something found at the margins of poor countries, such as a hawker stand in Thailand or a roadside vendor in Ghana. But that is misleading. Although it represents a greater share of total output in poor countries, it exists in rich and poor places alike. Recent research suggests that the grey economy is growing. Moreover, a new study suggests that it may be slowing the overall economic growth of developing countries. Measuring the invisible By its very nature, the informal economy's size in any country is hard to observe. In a paper published a couple of years ago * , Friedrich Schneider, of the Johannes Kepler University of Linz, exhaustively examined
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This note was uploaded on 04/11/2009 for the course ECON 102 taught by Professor Serra during the Winter '08 term at UCLA.

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informal - | Articles by Subject | Economics...

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