Daily Archives: August 18, 2015

The Underground Economy

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Individuals and firms sometimes conceal the buying and selling of goods and services. In which case their production won’t be counted in GDP. Individuals and firms conceal what they buy and sell for three basic reasons:

  • They are dealing with illegal goods and services, such as drugs or prostitution;
  • They want to avoid paying taxes on the income they earn;
  • They want to avoid government regulations.

Estimates of the size of the underground economy in Australia vary widely, but a study by ABS estimated it to be 1.3% of GDP, or over $17 billion. The underground economy in some poor countries such as Peru and Zimbabwe may be more than half of measured GDP. I wonder how big it is the underground economy in Thailand.

 

In the link bellow, you can find the entire piece of work done by ABS:

http://www.abs.gov.au/ausstats/abs@.nsf/featurearticlesbytitle/B129068549B24F82CA257694001290C1?OpenDocument

http://www.bloomberg.com/ss/10/07/0729_worlds_biggest_shadow_economy/8.htm