Black market

Grey market
A black market in Shinbashi in 1946.
A black market salesman (fly by night) depicted in graffiti in Kharkiv, Ukraine (2008)

A black market, underground economy, or shadow economy is a clandestine market or series of transactions that has some aspect of illegality or is characterized by some form of noncompliant behavior with an institutional set of rules. If the rule defines the set of goods and services whose production and distribution is prohibited by law, non-compliance with the rule constitutes a black market trade since the transaction itself is illegal. Parties engaging in the production or distribution of prohibited goods and services are members of the illegal economy. Examples include the drug trade, prostitution (where prohibited), illegal currency transactions and human trafficking. Violations of the tax code involving income tax evasion constitute membership in the unreported economy.[1][2]

Because tax evasion or participation in a black market activity is illegal, participants will attempt to hide their behavior from the government or regulatory authority.[3] Cash usage is the preferred medium of exchange in illegal transactions since cash usage does not leave a footprint.[4] Common motives for operating in black markets are to trade contraband, avoid taxes and regulations, or skirt price controls or rationing. Typically the totality of such activity is referred to with the definite article as a complement to the official economies, by market for such goods and services, e.g. "the black market in bush meat".

The black market is distinct from the grey market, in which commodities are distributed through channels that, while legal, are unofficial, unauthorized, or unintended by the original manufacturer, and the white market, in which trade is legal and official.

Black money is the proceeds of an illegal transaction, on which income and other taxes have not been paid, and which can only be legitimised by some form of money laundering. Because of the clandestine nature of the black economy it is not possible to determine its size and scope.[5]


Mercado Negro, so called "Black Market", in La Paz, Bolivia.

The literature on the black market has not established a common terminology and has instead offered many synonyms including: subterranean; hidden; grey; shadow; informal; clandestine; illegal; unobserved; unreported; unrecorded; second; parallel and black.[3]

There is no single underground economy; there are many. These underground economies are omnipresent, existing in market oriented as well as in centrally planned nations, be they developed or developing. Those engaged in underground activities circumvent, escape or are excluded from the institutional system of rules, rights, regulations and enforcement penalties that govern formal agents engaged in production and exchange. Different types of underground activities are distinguished according to the particular institutional rules that they violate. Four major underground economies can be identified:[3][6]

  1. the illegal economy
  2. the unreported economy
  3. the unrecorded economy
  4. the informal economy

The "illegal economy" consists of the income produced by those economic activities pursued in violation of legal statutes defining the scope of legitimate forms of commerce. Illegal economy participants engage in the production and distribution of prohibited goods and services, such as drug trafficking, arms trafficking, and prostitution.[6]

The "unreported economy" consists of those economic activities that circumvent or evade the institutionally established fiscal rules as codified in the tax code. A summary measure of the unreported economy is the amount of income that should be reported to the tax authority but is not so reported. A complementary measure of the unreported economy is the "tax gap", namely the difference between the amount of tax revenues due the fiscal authority and the amount of tax revenue actually collected. In the U.S. unreported income is estimated to be $2 trillion resulting in a "tax gap" of $450–$600 billion.[7][8]

The "unrecorded economy" consists of those economic activities that circumvent the institutional rules that define the reporting requirements of government statistical agencies.[6] A summary measure of the unrecorded economy is the amount of unrecorded income, namely the amount of income that should (under existing rules and conventions) be recorded in national accounting systems (e.g. National Income and Product Accounts) but is not. Unrecorded income is a particular problem in transition countries that switched from a socialist accounting system to UN standard national accounting. New methods have been proposed for estimating the size of the unrecorded (non-observed) economy.[9] But there is still little consensus concerning the size of the unreported economies of transition countries.[10]

The "informal economy" comprises those economic activities that circumvent the costs and are excluded from the benefits and rights incorporated in the laws and administrative rules covering property relationships, commercial licensing, labor contracts, torts, financial credit and social security systems.[6] A summary measure of the informal economy is the income generated by economic agents that operate informally.[11][page needed][12] The informal sector is defined as the part of an economy that is not taxed, monitored by any form of government, or included in any gross national product (GNP), unlike the formal economy. In developed countries the informal sector is characterized by unreported employment. This is hidden from the state for tax, social security or labour law purposes but is legal in all other aspects.[13] On the other hand, the term black market can be used in reference to a specific part of the economy in which contraband is traded.

Other Languages
Afrikaans: Sluikhandel
العربية: اقتصاد تحتي
azərbaycanca: Qara bazar
Bân-lâm-gú: Iá-mih
беларуская (тарашкевіца)‎: Чорны рынак
български: Черен пазар
català: Mercat negre
čeština: Černý trh
Deutsch: Schwarzmarkt
Ελληνικά: Μαύρη αγορά
español: Mercado negro
Esperanto: Nigra merkato
euskara: Merkatu beltz
français: Marché noir
한국어: 암시장
հայերեն: Սև շուկա
हिन्दी: काला बाजार
hrvatski: Crno tržište
Bahasa Indonesia: Pasar gelap
italiano: Mercato nero
עברית: שוק שחור
ಕನ್ನಡ: ಕಾಳಸಂತೆ
latviešu: Melnais tirgus
lietuvių: Juodoji rinka
मैथिली: काला बाजार
Malagasy: Tsena maizina
മലയാളം: കരിഞ്ചന്ത
Bahasa Melayu: Pasaran gelap
Nederlands: Zwarte markt
日本語: 闇市
norsk nynorsk: Svartebørs
occitan: Mercat negre
ਪੰਜਾਬੀ: ਕਾਲਾ ਧਨ
polski: Czarny rynek
português: Mercado negro
русский: Чёрный рынок
shqip: Tregu i zi
සිංහල: කළු කඩය
Simple English: Black market
српски / srpski: Crno tržište
srpskohrvatski / српскохрватски: Crno tržište
svenska: Svart marknad
тоҷикӣ: Бозори сиёҳ
українська: Чорний ринок
Tiếng Việt: Kinh tế ngầm
粵語: 黑市
中文: 黑市