Today, I read an article about the shadow economy of the Asia-Pacific.
According to the article, the shadow economy can be categorized into four groups: illegal monetary, illegal non-monetary, legal monetary and legal non-monetary transactions.
At first, trade with stolen goods, drug dealing and manufacturing, prostitution, gambling, smuggling, and fraud can be regarded as illegal monetary transactions.
Second, illegal non-monetary transactions mean barter of drugs, stolen goods, smuggling, etc. Produce or growing drugs for own use and theft for themselves also fall into this second group.
Third, legal monetary transactions mean tax evasion and tax avoidance. For example, unreported income from self-employment; wages, salaries, and assets from unreported work related to legal services and goods.
Fourth, legal non-monetary transactions consist of barter of legal
services and goods. All DIY work and neighbor help also fall into the group.
According to the table in the article, we can see that the largest shadow economy estimate is for Thailand, with 51.9% of official GDP. This is followed by Sri Lanka (43.7% of GDP) and the Philippines (42.6% of GDP). The next class of estimates includes India (22.8% of GDP) and Taiwan (19.6% of GDP). At the lower end of the scale is China (13.4% of GDP), New Zealand (12.9% of GDP) and Japan (11.3% of GDP).
Although the shadow economy consists common behaviors, it is bad for governments to let it grow because this unreported economic power prevents efficient implementation of public policy. The shadow economy affects the quality of national economic data. Therefore increasing shadow figures can impede progress of economic policies.