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Submitted by G.Raballand on

You are right that informal/underground economy is present all over the world but when speaking at informal trade, the extent of it differs in the world. In some developing countries, official statistics may account for less than 10% or even 5% of informal estimates. In developed countries, this ratio is much higher. There is a correlation between the level of taxation and the extent of informal trade but also between the governance context and the extent of informal trade. Where corruption is pervasive, informal trade is likely to flourish, especially if you have a complicated tariff structure with numerous tariff peaks. In many developing countries, all these elements are present and contributes to explain the phenomenon.