How Big Is the World Black Market?

Economists Ceyhun Elgin and Oguz Oztunali are researching the size of shadow economies, or black markets, around the world. Using a dataset with 7,395 observations for 161 countries from 1950 to 2009, they’re looking into how the size of black markets differs in rich and poor countries.

They estimate that shadow economies account for 22.67 percent of world GDP, with a generally downward trend that seems to have been interrupted by the global recession:

For almost all country groups (except for the post-Socialist one), we observe a declining trend over time. However, the pace of the reduction seems to lose some momentum in the last decade. Somewhat more interestingly, we observe a spike staring in 2007. Considering the emergence of the global economic crisis, this could give further support for the hypothesis that the size of the shadow economy is countercyclical, as suggested by Roca et al (2001) and Elgin (2012).

They also found that rich countries have smaller shadow economies:

In Figure 2, we group countries with respect to GDP per-capita and then report the average GDP-weighted shadow economy size in each group. Here, we divide the countries into five categories – poorest, second, third, fourth and the richest 20%. Not surprisingly, richer countries tend to have a smaller shadow economy; however … this relationship is not exactly linear, especially in a cross-country sense.



It'd be nice if they defined their terms. What exactly is included in a "shadow economy"? Illegal drugs, stolen goods, or what?

Maybe the size of the shadow economy decreases because over time governments make fewer things illegal?


Shadow economies are just the aggregate transactions without a taxable paper trail, obviously including the trade of illegal products and services, but also just unreported unaccounted transactions/income.

Seems a silly delineation though, as infrastructure and enforcement of accounting and taxation, or in other words market sophistication, has as much to do with defining shadow economies as does the actual intent of the market participants.

Eric M. Jones.

It might be, that the longer (for money) paper is better; but I have to say that I am not happy about this summary because it raises too many questions, not only about methodology but content...that is, what are we talking about?

Is prostitution included? Illegal drugs? Weapons? Third-world adoptions? Slave trade? Copied software? Bush meat? Pirated DVDs? What? Does a black market mean illegal stuff or non-payment-of-taxes stuff?

I am baffled....and I presume the article falls short of comprehensive reality. But how is one to know...?

Andrew B

I would like to see individual countries listed- failures such as "Greece and Russia" versus successful economies such as "Germany and US" versus successful developing countries such as "China and Brazil".


you can look at this for individual countries


The fact that less wealthy countries have larger black markets is obvious. In mexico, police are much more prone to bribes and the drug trade is huge. This is related Mancur Olson's theory of government banditry. With corrupt government comes corrupt people.


Are lemonade stands considered black market? I know it sounds ridiculous but could they? They are selling a good without a tax and making a profit. Usually the lemonade sold also isn't kept account of and there is no transaction book, and if there is it is just used by the owner to see how much they made.


Great work by Ceyhen Elign and Oguz Oztunali. The results they have come up supports the real situation of the Economies..Its easily visible that the corruption is rampant in poorest countries and hence could be includeed in one of the main agenda of policy makers.. You have done a great work by supporting it with facts.

Keith Rowell

Any more recent figures for the chart since 2008?