Shadow economies: A lengthening shadow | The Economist

Shadow economies: A lengthening shadow | The Economist

A lengthening shadow
Shadow economies have grown since the financial crisis began

Aug 11th 2010 | From The Economist online

A NEW estimate of the size of shadow economies around the world sheds light on a worrying trend. Friedrich Schneider, of Linz University in Austria, reckons that, for the first time in a decade, transactions taking place outside the taxable and observable realm of the official economy captured by GDP numbers are increasing. Shadow economy does not mean ill-gotten gains here, but legal economic activity that is not taxed. Mr Schneider attributes this reversal to the financial crisis, which seems to be pushing more people in OECD and EU countries to avoid the extra burden of taxation by resorting to informal transactions. The shadow economy, in other words, can act as a cushion when times are tough.

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