The phenomenon of underground economy can be observed all around the world, regardless of a country´s state of development. It has been studied and discussed in literature for several decades. In the 1980s the size of the underground economy in the United States was higher than during World War II for the first time, and it continued to grow due to tax increases in the 1990s. In addition, globalization and the resulting greater competition as well as the increasing number of unregistered immigrants give rise to unrecorded activities.
In this paper I will focus on the causes and effects of the underground economy in the United States. Therefore, I will first explain the main motivators for individuals to take action in the unofficial economy, such as a legal framework consisting of high tax schemes and social security burdens as well as the institutional quality in terms of bureaucracy and regulatory discretion.
Second, I will examine some of the most affected sectors. In this context I will especially concentrate on underground immigrants, contraband trade, and money laundering as well as labor-intense services undertaken by not-registered workers.
Finally, I will address the results and effects of the underground economy on the recorded one and its labor and money markets. In this section of the paper I will also show how the U.S. underground economy is related to other phenomena such as the budget deficit, the “gray area phenomenon” and corruption.
In the final part of the paper I will focus on possible solutions to reduce the extent of underground activities. I will especially emphasize some methods to measure and estimate invisible economic action on the one hand and on the implementation of policy engagement on the other.
A brief conclusion in the end sums up the main points and provides an overview of the aspects developed in this paper.
Table of Contents
1. Introduction
2. Causes and motivators
2.1 The legal framework and institutional quality
2.2 Globalization and additional motivation
3. Affected sectors
3.1 Underground immigrants in New York
3.2 Contraband trade and money laundering
3.3 The service sector
4. Results and effects
4.1 Consequences
4.2 The "gray area phenomenon" (GAP)
5. Options and solutions
5.1 Measurement and estimates
5.2 Policy implementation
6. Conclusion
Objectives and Topics
This paper aims to analyze the underlying causes, sectoral impacts, and economic consequences of the underground economy in the United States, while evaluating potential strategies for estimation and mitigation.
- Drivers of unofficial economic activity including taxation and institutional quality.
- Sector-specific analysis of underground labor, contraband trade, and money laundering.
- Macroeconomic effects and the relationship with budget deficits and corruption.
- Methodological approaches to measuring the shadow economy and effective policy engagement.
Excerpt from the Book
1. Introduction
The phenomenon of underground economy can be observed all around the world, regardless of a country´s state of development. It has been studied and discussed in literature for several decades. In the 1980s the size of the underground economy in the United States was higher than during World War II for the first time, and it continued to grow due to tax increases in the 1990s. In addition, globalization and the resulting greater competition as well as the increasing number of unregistered immigrants give rise to unrecorded activities.
In this paper I will focus on the causes and effects of the underground economy in the United States. Therefore, I will first explain the main motivators for individuals to take action in the unofficial economy, such as a legal framework consisting of high tax schemes and social security burdens as well as the institutional quality in terms of bureaucracy and regulatory discretion.
Summary of Chapters
1. Introduction: Outlines the global prevalence and historical growth of the underground economy in the U.S. and defines the scope of the paper.
2. Causes and motivators: Examines external drivers like legal frameworks and taxation, as well as the impacts of globalization and personal incentives on underground participation.
3. Affected sectors: Details specific areas of activity, including immigrant labor in New York, contraband trade, money laundering, and the service sector.
4. Results and effects: Discusses the macroeconomic consequences of the underground economy, its relationship to the "gray area phenomenon," and its connection to corruption.
5. Options and solutions: Explores methods for measuring invisible economic action and suggests policy interventions to reduce the size of the shadow economy.
6. Conclusion: Summarizes the key findings regarding the complexity of the U.S. underground economy and proposes directions for future research.
Keywords
Underground economy, Shadow economy, U.S. economy, Tax evasion, Money laundering, Illegal immigrants, Institutional quality, Gray area phenomenon, Budget deficit, Corruption, Labor markets, Economic growth, Policy implementation, Unofficial economy, Informal sector.
Frequently Asked Questions
What is the core subject of this paper?
The paper examines the underground (or shadow) economy within the United States, focusing on why it exists, which sectors are most affected, and what its broader economic impacts are.
What are the primary thematic fields covered?
The key themes include the legal and institutional drivers of the shadow economy, the role of globalization, specific criminal and service-sector activities, and the challenges of measuring unrecorded economic output.
What is the primary objective of the research?
The objective is to explain the motivators for participating in the unofficial economy, analyze the sectors involved, and evaluate how policy measures can address the negative economic consequences such as lost tax revenue.
Which scientific methods are employed?
The paper utilizes a literature-based analytical approach, synthesizing findings from various economic studies, surveys, and government estimates to interpret the scale and impact of the shadow economy.
What is discussed in the main body of the work?
The main body covers external and personal motivators, case studies of affected sectors like contraband and immigrant services, and a critical look at the consequences for government revenue and budget deficits.
Which keywords best characterize this work?
Key terms include underground economy, tax evasion, money laundering, institutional quality, and the "gray area phenomenon."
How does the "gray area phenomenon" specifically relate to the U.S. market?
In the U.S., the "gray area phenomenon" refers to the presence of non-state actors and organized crime groups that exploit the large, open market to conduct illegal trade and facilitate money laundering.
Is the underground economy viewed as entirely negative?
No, the paper notes that while it presents challenges, some studies suggest it can promote efficiency and competition, forcing legitimate companies to lower costs for consumers.
- Citar trabajo
- Raffaela C. M. Wallner (Autor), 2008, The U.S. Underground Economy, Múnich, GRIN Verlag, https://www.grin.com/document/164332
