Informal economy

What is the informal economy?

It is defined as informal economy, or underground economy, any activity or service that is kept hidden from the administration of the State.

This activity is usually within an environment of illegality or informal market.

Some businesses that can be considered economically informal are, for example, street vendors and food carts.

Characteristics of the informal economy

The main characteristics that surround this economy are the following:

1. It informal of your efforts, either in sales or services.
2. A massive movement of cash and non-commercial banking transactions.
3. Frequently related to poverty, lack of production and poor management of a country.
4. The development of ingenuity from necessity to find a lucrative way to work.

Causes and consequences of the informal economy

Causes

Some of the causes that can lead to the informal economy are:

• Inflation and migration.
• High costs in fields such as land, houses and other sales whose profit only benefits the seller, who avoids the taxes of the law on tax law.
• The economic situation of a country and its high taxes that generate the search for trade alternatives outside the economic system.

Consequences

Some of the most common consequences of the informal economy are the following:

• Loss of income in taxes by the State.
• Delay in modernization projects labor of the country.
• Generation of jobs in black, which brings problems of social adaptation for the employee.
• Limitation of economic growth and GDP of a country.

Examples of informal economy

Any examples of shops that we can find within the informal economy are as follows:

1. Piracy.
2. Prostitution.
3. Popular resale markets.
4. Tips.
5. Vehicle guards.
6. Crafts.
7. Glass cleaners.
8. Independent painters.
9. Mobile greengrocers.