A black market , underground economy , shadow market or shadow economy is a clandestine market or series of transactions that has some aspect of illegality or is not compliant with an institutional set of rules. If the rule defines the set of goods and services whose production and distribution are prohibited or restricted by law, non-compliance with the rule constitutes a black-market trade since the transaction itself is illegal. Such transactions include the illegal drug trade , [ clarification needed ] prostitution where prohibited , illegal currency transactions, and human trafficking.
Participants try to hide their illegal behavior from the government or regulatory authority. Typically, the totality of such activity is referred to with the definite article, e. The black market is distinct from the grey market , in which commodities are distributed through channels that, while legal, are unofficial, unauthorized, or unintended by the original manufacturer, and the white market, in which trade is legal and official.
Black money is the proceeds of an illegal transaction, on which income and other taxes have not been paid. Black money is often associated with money laundering , a process used to conceal the illegitimate source of the money. Because of the clandestine nature of the black economy, it is not possible to determine its size and scope. The literature on the black market has not established a common terminology and has instead offered many synonyms including subterranean, hidden, grey , shadow, informal, clandestine, illegal, unobserved, unreported, unrecorded, second, parallel, and black.
There is no single underground economy; there are many. These underground economies are omnipresent, existing in market oriented as well as in centrally planned nations, be they developed or developing. Those engaged in underground activities circumvent, escape, or are excluded from the institutional system of rules, rights, regulations, and enforcement penalties that govern formal agents engaged in production and exchange.
Different types of underground activities are distinguished according to the particular institutional rules that they violate: [ 4 ] [ 7 ]. The "illegal economy" consists of economic activities pursued in violation of legal statutes that define the scope of legitimate forms of commerce. Illegal-economy participants produce and distribute prohibited goods and services , such as drugs , weapons , and prostitution.
