The consequences of the shadow market are quite vast and extensive. First and foremost, tax revenue and social security contributions are reduced significantly. Ultimately, these two could easily be done away with thus causing an increase in budget deficit. This causes an increase in tax rates and the burden of these increased tax rates is borne by those who work in the official sector.
Furthermore, the quality of public goods e.g. infrastructure is reduced drastically as the state ends up not having enough revenue. This is so despite the fact that things like public infrastructure are very important to the growth of the economy.
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