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.īlack money is the proceeds of an illegal transaction, on which income and other taxes have not been paid, and which can only be legitimised by some form of money laundering. Typically the totality of such activity is referred to with the definite article as a complement to the official economies, by market for such goods and services, e.g. Common motives for operating in black markets are to trade contraband, avoid taxes and regulations, or skirt price controls or rationing.
Cash usage is the preferred medium of exchange in illegal transactions since cash usage does not leave a footprint. īecause tax evasion or participation in a black market activity is illegal, participants will attempt to hide their behavior from the government or regulatory authority. Violations of the tax code involving income tax evasion constitute membership in the unreported economy. Examples include the drug trade, prostitution (where prohibited), illegal currency transactions and human trafficking. Parties engaging in the production or distribution of prohibited goods and services are members of the illegal economy.
If the rule defines the set of goods and services whose production and distribution is prohibited by law, non-compliance with the rule constitutes a black market trade since the transaction itself is illegal. A black market, underground economy or shadow economy, is a clandestine market or series of transactions that has some aspect of illegality or is characterized by some form of noncompliant behavior with an institutional set of rules.
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