Best in brief: The hidden dangers of the informal economy

McKinsey present evidence that, contrary to what policy makers and academics believe, the `informal economy’ is growing round the world and does significant damage to legitimate business and also to governments, by depriving them of needed revenue.

Best In Brief

The hidden dangers of the informal economy

Diana Farrell

Governments suppose that the grey or black market (or informal economy as it has euphemistically become known), creates jobs and relives social tension. Academics tend to think the black market will disappear. But both are wrong. Some companies operate wholly or partially outside the law by underreporting employment, paying and being paid in undeclared cash, avoiding taxes, product regulations and copyrights. The problem is particularly acute in the developing world. The World Bank estimates the 'informal economy' generates 40%...

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