Underground Economies

Black Market Work in the European Community: Peripheral Work for Peripheral Localities?

by Colin Williams

Evaluating the participation of students in the informal economy: some evidence from a European survey

by Colin Williams

Colin C. Williams*, Sara Nadin*, Peter Rodgers*, Rob Wapshott*, Jan Windebank**,
Nick Williams* and Tim Vorley

Despite the widespread assumption that informal employment is more prevalent amongst those not in the formal labour... more Despite the widespread assumption that informal employment is more prevalent amongst those not in the formal labour market, there have been no evaluations of the extent and nature
of informal employment amongst the student population, who are in most nations a prominent group of those not in formal employment. This paper fills that gap. To do this, a
2007 Eurobarometer survey on informal employment comprising 26,659 face-to-face interviews conducted in the 27 member states of the European Union is reported, which includes interviews with 2,605 students aged 15 or over. The finding is that 1 in 11 (9 percent) of the student population surveyed had participated in informal employment in the previous year, although the propensity to do so varies significantly spatially. Analysing whether they engage in informal employment out of choice or necessity, the finding is that the ratio of involuntary-to-voluntary participation varies both spatially and according to the
type of employer for whom they work. Identifying that students comprise 19 percent of the informal workforce in the European union, this survey concludes that greater attention needs
to be paid to this group and why they do so if the informal economy is to be effectively tackled.

[2012] Capitalism, Illegality and Subversion: The Pre-Figurative Politics of the 2-Hour Work Day

by Michael Loadenthal

published in Unrest Magazine, Issue 6 March/April 2012.

Though this essay does not seek to apologize for the management and owning class, it does attempt to pose a more... more Though this essay does not seek to apologize for the management and owning class, it does attempt to pose a more challenging question about our relationship to work and survival: What about those of us who make our way through capitalism by exploiting not our neighbors or coworkers, but the outside margins of ‘less than fully regulated’ economies? What about those who seek to work less, yet earn more because they choose to operate in a sphere of employment that exists in between legal and illegal, regulated and unregulated, socially accepted and stigmatized?

Espaces & sociétés: appel à articles "Espaces notoires de trafic"

by Jérôme M.J. Monnet

La revue accepte les soumissions en français, anglais, espagnol, portugais, italien et allemand ; dans le cas où un article original dans une autre langue serait accepté pour publication, il reviendra à l'auteur de fournir une version française.

Des lieux sont connus pour être les espaces de « trafics », c'est-à-dire d’échanges qui requièrent la discrétion du... more Des lieux sont connus pour être les espaces de « trafics », c'est-à-dire d’échanges qui requièrent la discrétion du fait de leur caractère illégal ou parce que ces trafics impliquent une déviation ou de « petits arrangements » par rapport à une norme sociale de référence.

Ce type d'espace semble donc caractérisé par une ambivalence fondamentale entre sa nécessaire « notoriété », dans la mesure où les clients doivent pouvoir en connaître l'existence et s'y rendre et sa non moins nécessaire « invisibilité », afin que le trafic puisse se dérouler dans une relative tranquillité.

Les articles de ce dossier pourront porter sur différentes parties du monde et sur tous les types de trafic : drogue, argent, armes, cigarettes, produits piratés mais aussi êtres humains ou organes... Nous recherchons des contributions qui porteront sur l’identification, la création, le fonctionnement et les implications de ces espaces notoires de trafic.

America’s unreported economy: measuring the size, growth and determinants of income tax evasion in the U.S

by Edgar Feige

Co-authored with Richard Cebula
Forthcoming in Crime, Law and Social Change, April, 2012

This study empirically investigates the extent of noncompliance with the tax code and examines the determinants of... more This study empirically investigates the extent of noncompliance with the tax code and examines the determinants of federal income tax evasion in the U.S. Employing a refined version of Feige’s (1986; 1989) General Currency Ratio (GCR) model to estimate a time series of unreported income as our measure of tax evasion, we find that 18-23 % of total reportable income may not properly be reported to the IRS. This gives rise to a 2009 “tax gap” in the range of $390-$537 billion. As regards the determinants of tax noncompliance, we find that federal income tax evasion is an increasing function of the average effective federal income tax rate, the unemployment rate, the nominal interest rate, and per capita real GDP, and a decreasing function of the IRS audit rate. Despite important refinements of the traditional currency ratio approach for estimating the aggregate size and growth of unreported economies, we conclude that the sensitivity of the results to different benchmarks, imperfect data sources and alternative specifying assumptions precludes obtaining results of sufficient accuracy and reliability to serve as effective policy guides.

New estimates of U.S. currency abroad, the domestic money supply and the unreported economy

by Edgar Feige

Forthcoming in Crime, Law and Social Change, April, 2012

Despite financial innovations that have created important new substitutes for cash usage, per capita holdings of U.S.... more Despite financial innovations that have created important new substitutes for cash usage, per capita holdings of U.S. currency amount to $2950. Yet American households and businesses admit to holding only 15 percent of the currency stock, leaving the whereabouts of 85 percent unknown. Some fraction of this unaccounted for currency is held abroad (the dollarization hypothesis) and some is held domestically undeclared, as a store of value and a medium of exchange for transactions involving the production and distribution of illegal goods and services, and for transactions earning income that is not reported to the IRS (the unreported economy hypothesis). We find that the percentage of U.S. currency currently held overseas is between 30-37 percent rather than the widely cited figure of 65 percent. This finding is based on the official Federal Reserve/Bureau of Economic Analysis data which is a proxy measure of the New York Federal Reserve’s (NYB) “confidential” data on wholesale currency shipments abroad. We recommend that the NYB data be aggregated so as to circumvent confidentiality concerns, and be made readily available to all researchers in order to shed greater light on the questions of how much U.S. currency is abroad and on the particular location of overseas U.S. dollars. The newly revised official estimates of overseas currency holdings are employed to determine the Federal Reserve’s seigniorage earnings from 1964-2010, which have provided a $287 billion windfall for U.S. taxpayers. Overseas currency stock data are also used to derive estimates of the domestically held stock of currency as well as narrow and broad measures of domestic monetary aggregates. These domestic monetary aggregates are believed to be better predictors of future economic activity than traditional monetary aggregates and are tested to determine their ability to predict fluctuations in real output and prices. Domestic cash holdings are finally used to estimate the size of the U.S. unreported economy as measured by the amount of income that is not properly reported to the IRS. By 2010, we estimate that legal and illegal source unreported income” is $1.9 - $2.4 trillion, implying a “tax gap” in the range of $400- $550 billion. Currently, we estimate that 18-23 percent of total reportable income is not properly reported to the IRS.

Measuring the shadow economy with the currency demand approach - a reinterpretation of the methodology with an application to Italy

by Carmelo Petraglia

We contribute to the debate on how to assess the size of the shadow economy by proposing a reinterpretation of the... more We contribute to the debate on how to assess the size of the shadow economy by proposing a reinterpretation of the traditional Currency Demand Approach (CDA) a là Tanzi. In particular, we introduce three main innovations. First, we take a direct measure of cash transactions (the flow of cash withdrawn from bank accounts relative to total noncash payments) as the dependent variable in the money demand equation. This allows us to avoid using the Fisher equation, overcoming two severe critiques to the traditional CDA. Second, we include among covariates two distinct measures of ‘detected’ tax evasion, in place of the tax burden level. Finally, we control also for a new ‘criminal’ component of the shadow economy, considering money demand for illegal activities like drug dealing and prostitution. We propose an application of this ‘modified – CDA’ to a panel of 91 Italian provinces for the years 2005-2008.

'Popular Morality and the Black Market in Britain, 1939-55', in Frank Trentmann and Flemming Just (eds), Food and Conflict in Europe in the Age of the Two World Wars (Basingstoke, Palgrave Macmillan, 2006), pp. 243-265.

by Mark Roodhouse

Drawing upon diaries, letters, memoirs, opinion polls and Home Intelligence reports, this essay argues that during the... more Drawing upon diaries, letters, memoirs, opinion polls and Home Intelligence reports, this essay argues that during the Second World War the majority of participants in Britain’s black markets in price-controlled and rationed foodstuffs accepted the need for economic control and supported the principle of ‘fair shares for all’ while contesting the application of this principle in their individual cases. Paying close attention to accounts of black market dealing in food, which are found in replies to a self-report survey conducted by the independent social research organisation Mass-Observation in 1948, this essay sheds light on popular notions of distributive justice and everyday moral reasoning in 1940s Britain. The self-limiting behaviour revealed in these replies, and the moral stances that underpinned it, contrasts starkly with the experience of civilians in Nazi Occupied Europe and goes someway to explaining the comparatively small-scale of black market dealing in wartime Britain. Encouraged by the right-wing press and the Conservative Party, traders and consumers questioned the need for economic control after the war ended, weakening moral inhibitions to black market activity and making illegal dealing in meat easier to justify. Ministry of Food officials fought an increasingly desperate battle to maintain a high-level of compliance with food rationing against a background of mounting public disquiet and growing reluctance on the part of the police and the courts to enforce the regulations. As soon as the economic situation allowed, the government decontrolled foodstuffs, fearing that continued state interference would undermine public respect for the law.

Beyond the formal/informal jobs divide

by Colin Williams

To evaluate critically the recurring assumption that a job is either formal or informal, but never simultaneously... more To evaluate critically the recurring assumption that a job is either formal or informal, but never simultaneously both, this paper uncovers how in south-eastern Europe many formal employees receive not only a declared wage from their formal employer but also an additional undeclared (‘envelope’) wage. Reporting a 2007 EU-wide survey comprising 26,659 face-to-face interviews, some 1 in 6 (16%) formal employees in south-east Europe are found to be in these hybrid ‘under-declared’ jobs receiving on average 60% of their gross salary as an envelope wage. Uncovering how, despite this employment arrangement being unevenly distributed across countries, employee groups and businesses, it is not confined to small pockets but is ubiquitous across the south-east European labour market and beyond, the paper then concludes by discussing the implications for both policy and theory of the existence of ‘under-declared’ formal employment

Reconceptualising women's and men's undeclared work: some lessons from Europe

by Colin Williams

Recognizing that the current conceptualizations of men’s and women’s undeclared work derive almost entirely from a... more Recognizing that the current conceptualizations of men’s and women’s undeclared work derive almost entirely from a limited range of small-scale studies of specific localities, sectors and occupations, this article begins to resolve this dearth of evidence by reporting the findings of an extensive
cross-national survey of undeclared work conducted in 2007 across 27 European Union (EU) nations. The outcome is fresh and extensive EU-wide evidence that extends existing conceptualizations of the gender differences in terms of participation, sector, contract type and pay. However, the
recognition that undeclared work is conducted for closer social relations and sometimes for motives other than financial gain, is shown to apply not only to women, as previously contended, but to men as well and to constitute
most of the undeclared work in the EU. The result is a call for a fundamental reconceptualization of the nature of undeclared work that recognizes the heterogeneous work relations involved.

Joining up the fight against undeclared work in Europe

by Colin Williams

A report for the European Commission on the feasibility of establishing a platform to tackle undeclared work A report for the European Commission on the feasibility of establishing a platform to tackle undeclared work

Women entrepreneurs in the Indian informal sector

by Colin Williams

International Journal of Gender and Entrepreneurship

Purpose – Studies on women entrepreneurs either view women through a structuralist lens, as marginalised populations... more Purpose – Studies on women entrepreneurs either view women through a structuralist lens, as marginalised populations engaged in low-quality work, or through a neo-liberal lens, as engaged in relatively higher quality endeavour more as a rational choice. The aim of this paper is to evaluate
critically these explanations in relation to women entrepreneurs in the informal sector in India.
Design/methodology/approach – To evaluate the contrasting explanations of structuralist and new liberal approaches, questionnaire surveys were conducted in two phases, namely 2007 and 2010,over a period of several months. The sample design was stratified random and the sample was taken
from a range of cities in different parts of India.
Findings – The survey of 457 women entrepreneurs of the informal sector shows that although the structuralist representation is largely appropriate for women working as waged informal employees, it is not as valid for women informal entrepreneurs working on a self-employed basis. The results challenge the traditional understanding of the informal sector, and self-employed women in particular, and are discussed in the light of the institutional rational choice framework.
Research limitations/implications – The analysis highlights how the decision of entrepreneurship does not stand in isolation from other decisions and choices, is in line with
normative considerations, and is a collective rational choice for women entrepreneurs in the informal sector. This analysis is a first of its kind and calls for additional surveys to be undertaken of female (and male) informal entrepreneurs in other countries to establish this concept.
Originality/value – The analysis critically evaluates established explanations in relation to women
entrepreneurs in the inform

Measures to tackle undeclared work in the European Union

by Colin Williams

Spatial variations in the charcater of off-the-books entrepreneurship: lesson from a study of contrasting districts in Moscow

by Colin Williams

published in International Journal of Entrepreneurship and Small Business

Although there is growing recognition that many entrepreneurs start-up trading partially or wholly off-the-books, few... more Although there is growing recognition that many entrepreneurs start-up trading partially or wholly off-the-books, few have evaluated whether the character of this hidden enterprise culture varies spatially. To begin to do so, this paper evaluates whether and how the nature of off-the-books entrepreneurship differs across an affluent, mixed and deprived district of Moscow. Drawing upon 313 face-to-face interviews, the finding is that wholly legitimate enterprises represent just the tip of the iceberg in Moscow. Beneath the surface in all the districts is a large hidden enterprise culture. However, off-the-books entrepreneurship in the affluent district is comprised more of registered businesses trading partially off-the-books and conducted as a voluntarily chosen spin-off from their formal employment. In the deprived district, meanwhile, it is comprised more of unregistered wholly off-the-books businesses and such entrepreneurship is largely a survival tactic and last resort. The paper concludes by discussing the theoretical and policy implications of these findings. 

Small businesses in the informal economy: the evidence base

by Colin Williams

Small Business Service, London, 2004

America’s Underground Economy: Measuring the Size, Growth and Determinants of Income Tax Evasion in the U.S

by Edgar Feige

Co-authored with Richard Cebula

This study empirically investigates the extent of non compliance with the tax code and the determinants of federal... more This study empirically investigates the extent of non compliance with the tax code and the determinants of federal income tax evasion in the U.S. Employing the most recent data we find that 18-19% of total reportable income is not properly reported to the IRS, giving rise to a “tax gap” approaching $500 billion dollars. Three time periods are studied, 1960-2008, 1970-2008, and 1980-2008. It is found across study periods that income tax evasion is an increasing function of the average effective federal income tax rate, the unemployment rate, public dissatisfaction with government, and per capita real GDP (adopted as a measure of income), and a decreasing function of the Tax Reform Act of 1986 (during its first two years of being implemented). Modest evidence of a negative impact of IRS audit rates on tax evasion is also detected.

Keywords: Underground economy; unreported economy; tax evasion; tax gap; non compliance; Federal income tax.

JEL Classifications: E26; H26; O17; E41; E52

Türkiye'nin Kamu Finansman Sorununun Çözümünde Kayıtdışı Ekonominin Kayda Alınmasının Önemi

by Famil Şamiloğlu

Şamiloğlu, F., "Türkiye'nin Kamu Finansman Sorununun Çözümünde Kayıtdışı Ekonominin Kayda Alınmasının Önemi", Standart Ekonomik ve Teknik Dergi, 40, 26-28, 2001.