Most authors trying to measure the shadow economy still face the difficulty of a precise definition.
1 According to one commonly used definition it comprises all currently unregistered economic activities that would contribute to the officially calculated gross national product if the activities were recorded.
2 P. Smith (1994: 18) defines the shadow economy as ‘market-based production of goods and services, whether legal or illegal, that escapes detection in the official estimates of GDP’. Put differently, one of the broadest definitions is: ‘those economic activities and the income derived from them that circumvent or otherwise avoid government regulation, taxation or observation’.
3 As these definitions still leave room for interpretation, Table 1 provides examples of a reasonable consensus definition of the underground (or shadow) economy according to its broadest definition.