Black Economy

DEFINITION of 'Black Economy'

The segment of a country's economic activity that is derived from sources that fall outside of the country's rules and regulations regarding commerce. The activities can be either legal or illegal depending on what goods and/or services are involved.

BREAKING DOWN 'Black Economy'

For instance, a construction worker who is paid under the table will neither have taxes withheld, nor will the employer pay taxes on the his earnings. The construction work is legal; it is the nonpayment of taxes that classifies the event as part of the black economy. The illegal-weapons trade is an example of black-economy activity that is illegal.


Black markets are those goods and services that form the black (or underground) economy. Typically, black markets arise when a government restricts economic activity for particular goods and services, either by making the transaction illegal or by taxing the item so much that it becomes cost-prohibitive. A black market may arise to make illegal goods and services available or to make expensive items available for less money (such as pirated software).

RELATED TERMS
  1. Black Money

    Money earned through any illegal activity controlled by country ...
  2. Black Market

    Economic activity that takes place outside government-sanctioned ...
  3. Underground Economy

    The underground economy refers to illegal economic activity. ...
  4. Black

    A description of a positive balance on a company's financial ...
  5. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, ...
  6. Freeriding

    1. An illegal practice in which an underwriting syndicate member ...
Related Articles
  1. Savings

    9 Worst Items to Buy on Black Friday

    If these items are on your holiday shopping list, consider finding a substitute – or don't expect to get the deal of the year.
  2. Economics

    Where Does the Term "Black Friday" Come From?

    The term Black Friday can be used in a couple of different contexts; one positive and one negative.
  3. Markets

    How Big Is the Underground Economy in America?

    While the U.S. has a relatively small underground economy compared to the OECD average, since the global financial crisis it appears to be on the rise.
  4. Savings

    5 Best States for Black Friday Shopping

    These states have great deals on your day-after-Thanksgiving purchases. The secret? No – or lower – sales taxes.
  5. Credit & Loans

    Steps To Getting Out Of Debt

    Learn how to get your bank account back in the black and reach your financial goals.
  6. Investing

    4 Ways To Invest In Oil

    Many investors are looking for a way to invest in oil. Find out how you can buy into black gold.
  7. Budgeting

    3 Stores to Avoid This Coming Black Friday

    Learn what stores are best to avoid if you absolutely must participate in the madness known as Black Friday, and identify ways to obtain even better deals.
  8. Investing

    Retailers Rebel Against Black Friday: Bad Move?

    The Black Friday creep may have hit a wall as some stores are shutting their doors on Thanksgiving and even Black Friday to give employees the day off.
  9. Forex Education

    October: The Month Of Market Crashes?

    In the finance world, October is a month to be feared, but is it justified?
  10. Taxes

    Tax Avoidance Vs. Tax Evasion

    Evading taxes is illegal, but avoiding paying unnecessary tax is one of the keys to building wealth.
RELATED FAQS
  1. What is the difference between a command economy and a shadow economy?

    Learn about command and shadow economies, how the two economies function and the main difference between the two. Read Answer >>
  2. How is the stock market affected by Thanksgiving and Black Friday?

    See why Thanksgiving and Black Friday sales numbers are considered to be important indicators for stock market activity throughout ... Read Answer >>
  3. What is Black Friday?

    Black Friday is a popular label attached to the Friday following Thanksgiving Day in the US. This day marks the beginning ... Read Answer >>
  4. To whom was the term "corporate kleptocracy" first applied?

    The term "corporate kleptocracy" is believed to have originated in a 2004 report by the Special Committee of the Board of ... Read Answer >>
  5. What is the difference between wash trading and insider trading?

    Explore the differences between two trading practices, wash trading and insider trading, and find out why these practices ... Read Answer >>
  6. How effective is creating trade entries after spotting a Three Black Crows pattern?

    Understand the basics of the three black crows candlestick pattern and how this reversal signal is used for the creation ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center