The Future of the Underground Economy

The Future of the Underground Economy

The Future of the Underground Economy

Underground Economy comprises of all the illegal activities like drug trafficking and smuggling activities that happen to be anti-social in nature. They might also involve legal activities take part in evading of taxes. Majority of the economies are presently infected with the issues of Tax Evasion and underground economy.

The stronger the economic crisis hits a nation, the more the underground economy will develop (Kadokura, 2007). Ever since 2010, the underground economy has certainly become greater all over the globe, attributable to the universal financial crisis. The expectation is that the underground economy will grow if the financial crisis continues.

Intensity of Regulations

Research showed that there are chances of maximized intensity of regulations such as trade barriers and market regulations. This happens to be a significant factor that minimizes the freedom of choice particularly for individuals who take part in the official economy. A research done by Venkatesh (2006) found that an important empirical evidence of influences of the market regulations on the underground economy and how this will impact the future of the underground economy.

With the increased regulations especially in nations like America, there will be instances of substantial upsurge in the labor costs of the official economy. Because most of the costs tend to shift to the employees, the intensified regulations are expect to give another motivation to work in the underground economy where they have higher chances of being avoided.

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Summary

Strengthening the economy operating on books could help in reducing the underground economy in the future. Companies experiencing positive returns and increase in sales will be motivation to development, and in turn hire citizens back to the workforce.

References
Feige, E. L. (2009). New estimates of overseas U.S. currency holdings, the Underground economy and the “Tax Gap”.

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