NCPA Brief Analysis: Europe's Underground Economies
|
The growth of the underground economy is a matter of increasing concern throughout Europe. Although this black market or unofficial economy includes criminal activity, most of it consists of ordinary goods and services driven underground by excessive taxation and unreasonable regulations.
- An unpublished report by the European Union says that underground economic activity may account for between 7 percent and 16 percent of the total gross domestic product (GDP) of its member nations.
- In the EU, the underground economy employs between 10 million and 28 million workers and accounts for 7 to 19 percent of employment.
- A study by Austrian economist Friedrich Schneider of Johannes Kepler University says the underground economy ranges in size from 6.6 percent of Gross National Product (GNP) in Switzerland to nearly 26 percent in Italy (see figure).
However, the largest underground economies of the area unquestionably exist in the formerly Communist countries of Eastern Europe (see figure).
- In Russia a U.S. Treasury-sponsored study put the underground economy at close to 50 percent of official gross domestic product (GDP).
- A 1996 study by the prime minister's office in Hungary found that 17 percent to 25 percent of the average family's expenditures were in the black market.
- And earlier this year, Serbia demanded that all property and vehicle sales be transacted through the banks, in an effort to stamp out cash-only sales in the underground economy.
Authorities frequently attack the problem with arrests and prosecutions, but experts say the incentive to make money free of tax or government control is too great for such methods to have more than a modest impact.
Source: Bruce Bartlett (NCPA Senior Fellow), "Europe's Underground Economies," Brief Analysis No. 278, September 4, 1998, National Center for Policy Analysis, 12770 Coit Rd., Suite 800, Dallas, Texas 75251, (972) 386-6272.
For text go to http://www.ncpa.org/ba/ba278.html
|
