Shadow economy

The shadow economy is the macroeconomic and criminalist generic term for all economic activities from which - legally or illegally - income is generated, but state market regulation , taxation or statistical recording is avoided.

The shadow economy in the broader sense includes the self-sufficiency economy , including the informal economic sector and the shadow economy in the narrower sense with illegal work and the black market .

The share of the shadow economy in Germany is (depending on the estimate) 5–10% of the gross domestic product . In 2019, the size of the shadow economy is said to have been 319 billion euros or around nine percent of gross domestic product. The proportion has been falling since 2009 (as of 2019).

Concept and delimitations

In the literature, only the illegal part of these economic activities is sometimes referred to as the shadow economy in the narrower sense . The following table provides an overview:

Black economy in the broader sense
	Self-sufficiency economy (legal)		Black economy in the narrower sense (illegal)
Economic sector	Household sector	Informal sector	Irregular sector	Criminal Sector
activity	legal	legal	legal (service / work)	illegal (criminal act)
execution	legal	legal	illegal	illegal
Examples / sub-concept	Neighborhood help self-sufficiency	Informal economy	Moonlighting	Black market

Forms and characteristics

In economic theory , an economic subject then switches to the shadow economy if the state taxes and duties or the regulatory hurdles are perceived as so high that it seems advantageous to avoid them. An economic or social system that is no longer functioning can also be the cause.

Expressly prohibited economic activities must, by definition, take place entirely in the shadow economy. There is no alternative here for the economic subject (other than giving up the corresponding activity). Typical forms of the shadow economy are:

Undeclared work , in which workers are not registered and thus no social security contributions and no wage taxes are paid ( illegal employment ). If state social benefits are being drawn at the same time , there is a criminal abuse of transfer benefits .

A special variant of undeclared work is the exercise of manual activities without the necessary professional qualification ( journeyman's certificate , master craftsman's certificate ) or business registration . In Germany, a person working illegally does not meet the requirements for their work (e.g. a state license ), although there is no tax evasion. The sectors of the economy particularly affected include construction and housework and family work in private households .

Black cash registers through cash deposits or cash withdrawals without booking and without receipt .

Tax evasion in any form.

Money laundering by smuggling illegally earned money or illegally acquired assets into the legal financial and economic cycle .

Black market , i.e. illegal trade without issuing invoices and paying sales tax . This term also includes the trade in prohibited goods such as As drugs , weapons , stolen goods stolen goods, etc.

Smuggling , i.e. illegal import (seldom export ) of goods or services. The state escapes the duty due .

Illegal foreign exchange transactions . They were often before the introduction of the euro , the liberalization of global financial markets and the introduction of internet banking ; today they are rare. There used to be more currency restrictions and more currencies with limited convertibility .

Economic consequences

Negative consequences of the shadow economy are a lack of tax revenue and social security contributions . However, these are partially compensated: By avoiding taxes and duties, the relative price of a good is cheaper in the shadow economy than in the official economy. This means that additional demand can be siphoned off and satisfied below the prevailing market price. Some of the income from shadow economy activities flows back into the official economy, where it is used for transactions subject to taxes and duties.

Scope and development

The extent of the shadow economy in the narrower sense can only be estimated. Usually estimates are published as a percentage of gross domestic product (GDP). The national accounts cover the shadow economy by including shadow economy activities with estimated surcharges in their calculation methods.

The size of the shadow economy in Germany has increased significantly since 1970 (only 2.7% –3.0% of official GDP). At the beginning of the 1990s it was already more than 12% of GDP and peaked at 17.1% in 2003. In the following years it decreased again and in 2005 still amounted to 15.4% of GDP. A further decrease to 14.7% is also expected for 2006, since the legal changes on the tax deductibility of household-related services , childcare and care services are already supposed to have an effect. In 2010 there was a slight decline in the shadow economy. The total volume of the shadow economy is quantified at approx. 347.6 billion euros, which corresponds to a ratio of the shadow economy to official GDP of 13.91%. For 2011, a total volume of approx. 345.8 billion euros are forecast, which corresponds to a decrease to approx. 344 billion euros or 13.2%. According to the model calculations, the ratio of the shadow economy to the official gross domestic product in 2015 will remain unchanged from 2014 at 12.2% with a total volume of 339 billion euros.

In comparison with the OECD countries, Germany is in the middle. At the top are Greece (22.4%), Italy (20.1%), Spain (18.2%) and Portugal (17.6%). The Switzerland (6.5%) and the USA (5.9%) have the lowest share of the shadow economy at the respective GDP (as of 2015).

The normalization of the national shadow economies to the respective GDP (shadow economy / GDP) provides valuable information about how much the national tax revenue would theoretically be increased if the efficiency of tax collection could be increased in a cost-neutral manner. In practice, however, the efficiency of tax collection proves to be cost-intensive and quite heterogeneous because it is significantly dependent on the industry. The construction industry can be cited as a typical example of low tax morale, but tax evasion is hardly possible in the financial industry. While the construction industry makes a similar significant contribution to the shadow economy in all countries, the financial industry only leads national GDP to extreme heights in individual cases. So the shadow economy appears z. For example, Luxembourg is the smallest in the EU with around 8% of GDP, although it is the highest of all EU countries per capita.

The GDP-normalized data alone do not really do justice to the assessment of the extent of the shadow economy and its root cause analysis. Nonetheless, they are mainly used for policy analysis in countries with extremely high GDP.

Map of the national per capita shadow economies in Europe. The red color coding corresponds to the values of the red bars in the diagram on the left.

literature

Friedrich Schneider , Dominik Enste : Black economy and moonlighting. Scope, causes, effects and economic policy recommendations . Oldenbourg, Munich / Vienna 1999, ISBN 978-3-486-25357-3 .

Reinhard Scholzen : Black economy in Germany. In: German Police Leaflet for Education and Training , Vol. 20, No. 3, 2002, ISSN 0175-4815 , pp. 3–4.

Dominik Enste , Friedrich Schneider (Ed.): Yearbook shadow economy 2006/2007. On the area of tension between politics and economy . LIT, Münster 2006, ISBN 978-3-8258-8679-0 .

Urban Janisch: The shadow economy in transformation economies - A critical consideration using the example of the Hungarian economy. Publishing house Dr. HH Driesen, Taunusstein 2006, ISBN 3-936328-50-1 . At the same time: Leipzig, University, dissertation, 2005.

The globalized crime . In: Die Zeit , No. 27/2007

Web links

Wiktionary: shadow economy - explanations of meanings, word origins, synonyms, translations

Declining shadow economy: a curse or a blessing? in perspective: blue
Shadow Economies of 145 Countries all over the World: What do we really know?

Individual evidence

^ Klaus Schubert, Martina Klein: Das Politiklexikon . 5th, updated Edition. Dietz, Bonn 2011.
↑ Markus Dettmer, Marcel Rosenbach, Cornelia Schmergal: In the shadow world . In: Der Spiegel . No. 42 , 2019, p. 44–47 ( online - October 12, 2019 ).
↑ Table based on: Dominik Enste: Shadow economy and institutional change . Mohr Siebeck, Tübingen, 2002, p. 11.
↑ Study by the Institute for Applied Economic Research (IAW) on the development of the shadow economy in 2011
^ Friedrich Schneider , Bernhard Boockmann: The size of the shadow economy - methodology and calculations for 2015 . (PDF) Linz and Tübingen, February 3, 2015
^ Friedrich Schneider: The Shadow Economy in Europe . University of Linz, 2013.

[1] Klaus Schubert, Martina Klein: Das Politiklexikon . 5th, updated Edition. Dietz, Bonn 2011.

[spiegel-2019-42-44-2] Markus Dettmer, Marcel Rosenbach, Cornelia Schmergal: In the shadow world . In: Der Spiegel . No. 42 , 2019, p. 44–47 ( online - October 12, 2019 ).

[3] Table based on: Dominik Enste: Shadow economy and institutional change . Mohr Siebeck, Tübingen, 2002, p. 11.

[4] Study by the Institute for Applied Economic Research (IAW) on the development of the shadow economy in 2011

[5] Friedrich Schneider , Bernhard Boockmann: The size of the shadow economy - methodology and calculations for 2015 . (PDF) Linz and Tübingen, February 3, 2015

[6] Friedrich Schneider: The Shadow Economy in Europe . University of Linz, 2013.