Unwrapping the Depth of the Underground Economy Around the World

Smuggling is a form of illicit trafficking that occurs in the shadow economy. As we talked about it before, it is a type of activity which encompasses a range of activities that are not reported to the government for tax or regulatory purposes. Why can it be hidden from the government? Types of items are regularly smuggled ranging from watches, to drugs, arms, and illegal immigrants, even exotic animals. Smugglers take advantage of people who need to escape natural disasters, poverty, conflict, and crises and they often recruit people from the same community or ethnic group as the migrants they are smuggling. Smugglers use various methods to avoid detection by authorities, such as using false documents, disguising themselves as legitimate travelers, using remote or less guarded border crossings, bribing officials, or using sophisticated technology to evade detection. 

It is difficult to determine the most smuggled country as smuggling involves a range of goods and activities, and accurate statistics are often difficult to obtain. However, some countries are known to have high rates of human smuggling, such as Eritrea, Turkey, Iraq, and Mexico. Additionally, some countries are known to be major producers and traffickers of drugs, such as Afghanistan, which is the biggest producer of opium worldwide and remains the most significant trafficking country. 

Furthermore, the shadow economy is a complex and constantly changing phenomenon that encompasses a range of activities. It can facilitate smuggling and open up possibilities for arbitrage in smuggles goods. Smuggling can also support wider illegal activity, such as drug dealing, human trafficking, and money laundering, and could even conceivably support terrorist activities. 

Recent changes in ways of working and business models, the growth of the digital economy, wider social changes, and globalization are causing new shadow economy activities to emerge and some existing ones to expand in scale or scope. While the shadow economy can have some positive impact, for instance providing employment opportunities, the negative effect wider aspect in the economy, such as undermining tax revenues, and creating new societal problems for the public. It is important for governments and policymakers to understand the nature and scope of the shadow economy and to develop effective strategies to address its negative impacts. 

References :

Nemec, Daniel, Eva Kotlnov, Igor Kotln, and Zuzana Machov. (2021) Corruption, Taxation and the Impact on the Shadow Economy. Economies 9: 18.

Adamoli, Sabrina. "money laundering". Encyclopedia Britannica, 25 May. 2023, https://www.britannica.com/topic/money-laundering. Accessed 29 May 2023.

UNODC, Global Study on Smuggling of Migrants (2018) (United Nations publication, Sales No. E.18.IV.9)

Friedrich, S. and Dominik, E. (2022) Hiding in the shadows : The Growth of the Underground Economy

Anna, E. and Ekaterina, N. (2015) Impact of Shadow Economy on Quality of Life : Indicators and Model Selection