The shadow sector, or informal economy, includes everything from illicit sidewalk sales of counterfeit handbags to large corporations that evade taxes and ignore regulations. It makes up a substantial portion of the global economy. The OECD estimated in 2009 that 1.8 billion workers participated in this sector, generating over $10 trillion in goods and services. Indeed, in many countries the number of people employed informally exceeds the number in the formal workplace.

Yet many aspects of the shadow economy remain under examined and poorly understood. In a recent project we studied a foundational issue: the relationship between licit and illicit economies.

by Robert G. Blanton, Bryan Early, Dursun Peksen

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