Parallel economy

Parallel Economy Model (Black Economy) and Their Examples

Parallel economy

Parallel Economy Model (Black Economy) and Their Examples

Parallel Economy

Although both are illegal, moonlighting is linked to the gray economy. It is a legal job, but the income is not declared. Parallel Economy (Black Economy) refers to people or businesses who operate entirely outside the tax and regulatory system or who are known to the authorities but do not correctly report their tax obligations. Other terms used include: the shadow economy, cash economy, underground economy or the cheating economy, illegal work, clandestine, marginal, underground, immersed, non-market, informal, invisible, parallel, hidden, occult…

The parallel economy should not be confused with the underground economy. This involves undeclared activity, either because it is illegal or to avoid incurring charges. The parallel economy can be declared: those who exercise it simply refuse, and in an explicit way, to be part of the usual market mechanisms.

Barter

Bartering was one of the earliest forms of trading. This system facilitates the exchange of goods and services when humans have not found money. The history of bartering can be traced back as far as 6000 BC. It is believed that the barter system was introduced by the Mesopotamian tribes.

For example they can do barter (local exchange systems based on work orders), reciprocal learning (knowledge exchange networks), recovery, self-production, etc. The parallel economy seeks to produce use values, not exchange values. It works on the principle of networks, communities, groups of peers. But it has the disadvantages of its advantages: producing social ties, it proves to be of low efficiency when it comes to activities for which the market economy benefits from economies of scale and techniques of sophisticated production. A crisis economy, it is struggling to become an alternative economy.

The black market, on the other hand, refers to the underground economy, that is to illegal activities, such as: illegal drug trafficking.

Examples of Parallel Economy

Economic activities that are expressly prohibited must, by definition, take place entirely in the parallel economy. Here there is no alternative for the economic agent (apart from doing without the corresponding activity). Typical manifestations of the shadow economy are:

Undeclared work

In which workers are not registered and therefore no contributions to social security and no wage taxes are paid ( illegal employment ). If state social benefits are also received at the same time, this constitutes a punishable misuse of transfer payments.

A special variant of undeclared work is the practice of handicraft activities without the required technical qualification, although there is no tax evasion. The sectors of the economy that are particularly affected include construction and housework and family work in private households.

Money laundering by smuggling illegally earned money or illegally acquired assets into the legal financial and economic circuit.

Many faces of labor exploitation

Forced labour, forced or compulsory labor means: “all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily.

Migrant children are also very exposed to clandestine and illegal work.

The parallel collaborative / economy is developing in all sectors of activity:
  • housing: rental between individuals, shared accommodation, exchange of apartments, participatory housing;
  • transport: rental of vehicles between individuals, exchange or resale of transport tickets, carpooling, collaborative delivery, online taxi (Uber);
  • food: consumer groups, catering;
  • miscellaneous equipment: sale or purchase of second-hand equipment, donation, loan, exchange or rental of equipment or apparatus;
  • clothing: rental, donation, barter, resale/purchase of clothing;
  • assistance services between individuals: shopping, DIY, cleaning, babysitting, animal care;
  • culture, education: online courses, tutoring, etc.

Economic Growth | Definition and Calculation


Sources: Your Article Library

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