No. 41, 1996 - The Weight of Black Trade and Black Services in the National Economy

Kopint-Datorg Rt. has been conducting research on various segments of the black economy. According to our findings, retail trade, household services and foreign currency transactions linked to tourism are of outstanding significance here. In processing data collected from the population – carried out by TÁRKI between 27th November and 8th December, 1995 – non-registered purchases were taken as belonging to the shadow economy. Non-registered purchases were those that occurred in the street, in markets, from ad hoc sellers, in retail shops, without the vendors giving receipts or vouchers.
We also collected empirical data directly pertaining to the phenomenon among users (costumers). The surveys carried out beforehand, based on questioning buyers/users only targeted the certain limited segments of the market in consumer goods and services, and did not combine results of empirical research with the economic background. Consequently they were not suitable for drawing conclusions that would have been valid at the level of the macro-economy. The main objective of this study is to estimate the weight of the black economy using propositions and volumes that can be interpreted at the level of the national economy, and that are characteristics of nonregistered goods and services.
The GDP generated in the black economy can, as revenue, be most readily realized in the form of cash through black trading of goods and services. Any opinion that sees a reduction of the black economy as an immediate and perceivable result of a policy of economic restrictions, seems to be over-optimistic. In our view, such a result may only be achieved in the long run, through a substantial tax cut and through concerted action, supported by society as a whole, against the black economy.

The paper is available here.