This type of economy plays a major role in many countries. People evade taxes and regulations by working or by employing people illegally. On the one hand, this unregulated economic activity can result in reduced tax revenue and public goods and services, lower tax morale and less tax compliance, higher control costs, and lower economic growth rates. But on the other hand, this type of economy can be a powerful force for advancing institutional change and can boost the overall production of goods and services in the economy. What economy can be described like this?

Другие предметы Колледж Неформальная экономика нелегальная экономика теневая экономика неформальная экономика экономика без налогов скрытая экономика Новый

The type of economy being described in your question is the "informal economy." Let's break down the characteristics and implications of the informal economy to understand why it fits this description:

• Definition: The informal economy refers to economic activities that occur outside of the formal, regulated economic framework. These activities are not monitored by the government and often do not adhere to official regulations, including taxation and labor laws.
• Tax Evasion and Regulations: In the informal economy, individuals and businesses often evade taxes and government regulations. This can happen when people work without official contracts, or when businesses employ workers off the books to avoid paying taxes and providing benefits.
• Negative Impacts:
• Reduced tax revenue: Governments collect less money in taxes, which can lead to a decrease in public goods and services, such as education, healthcare, and infrastructure.
• Lower tax morale and compliance: When people see others not paying taxes, they may be less inclined to comply with tax laws themselves.
• Higher control costs: Governments may need to spend more resources to monitor and control informal activities.
• Lower economic growth rates: The informal economy can hinder formal economic growth, as it may discourage investment and innovation in the formal sector.
• Positive Aspects:
• Advancing institutional change: The informal economy can highlight inefficiencies and rigidities in the formal economy, prompting reforms and changes in regulations.
• Boosting production: Despite its challenges, the informal economy can contribute to the overall production of goods and services, providing employment and income for many people, especially in developing countries.

Understanding the informal economy helps policymakers balance the need for regulation and the benefits of economic flexibility and innovation.