the underground economy

Topics: Unemployment, Economics, Economy Pages: 17 (4717 words) Published: May 27, 2014


I. Introduction
II. Conceptual clarifications and a theoretical approach
II.1 The labor market. The minimum wage.
II.2 Unemployment. The opportunity cost of labor.
III. The Underground Economy
III.1 The illegal economy
III.2 The informal economy
III.3 The underground production
IV. Conclusions

I. Introduction
Everything that happens in the social world in our time is the result of ideas. What is needed, is to fight against bad ideas, and in order to accomplish this, we -and by “we” it shouldn’t only be understood the population of a nation, but the entire world- have to identify and substitute them with irrefutable ones, to persuade people to adopt an assertive approach on every economic matter which by no means has a global impact, to pull apart unhealthy ideologies, to place the basement of the sustainable development of tomorrow’s world. Over the past century, there have been several waves of both economic growth and drop, associated to historical milestones such as the World War I, the following so called “Great Depression”, the World War II, the Social Totalitarianism regime, the climb to a transitional economy followed by the emergence of a free-market system, and, where the world stands nowadays, the Global Recession. Periods of economic prosperity are referred to as “booms” or “expansions” while the economic declines would be “recessions” or “depressions”. The world is now struggling to overcome the externalities of the latest and, in the same time, greatest recession, period in which the underground economy, the black market and all its implications are becoming of higher importance to the revival of the global economic system and to the income inequality issue in and between nations. The aim of this paper is not just to outline the major economic illnesses, but to go beyond the intrigues and make an in depth analysis regarding the whole economic phenomena, in which the vast majority consists of underground economy and has, nevertheless, been neglected as having a critical involvement. In the following sections, it is intended to shed light to the causes, reasons, implications and results of the ascending black market, while, by the end of the paper, stress out the inherent uncertainty : Is it benefic to persuade the track of the black market? Economy is a science, and it is acknowledged that science will never be able to explain absolutely everything, especially when it comes to the most unpredictable element, the human nature, the human behavior. Thus, this scientific approach must begin with assumptions, model-studying, and then proceed from there in order to acquire a close-to-reality conclusion. Further on, facts will be taken for granted and their effects will be closely analyzed.

II. Conceptual clarifications and a theoretical approach

1. The labor market. The minimum wage.
The motivation to work arises from the social, psychological and economic forces. People need income to pay their bills, but they also need a sense of achievement. As a consequence, people are willing to work – to supply labor. The market supply of labor represents the quantity of labor that workers are willing and able to supply at alternate wage rates in a given time period, ceteris paribus. The labor supply has several determinants such as: tastes income and wealth, expectations, prices and, last but not the least, taxes. Nevertheless, regardless of how many people are willing and able to offer their services, it is the employers who decide who and whether or not to hire. There is no such thing as a perfect functioning market. Thus, any imperfect, in this case, labor market, functions according to the interaction between the suppliers of labor services, meaning the employees, and the demanders...

References: OECD (2002) Measuring The Non-Observed Economy: A Handbook
Block, W
Acemoglu, D. (2012) Why Nations Fail
Ravenhill, J
Garibaldi, P. (2006) Personnel Economics in Imperfect Labour Markets
Motru, C
Voicu, C. (2009) The Mimetic Principle in the Underground Economy
Mankiw, G
Beardshaw, J. (2005) Economics. A student’s guide
Șerban, R
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