In general, the shadow economy generates a reduction of economic growth. On the other hand, this economy has some positive outcomes, albeit very few compared to the negative ones. This includes providing income for poor people especially in developing countries.
Furthermore, the increase of tax rates caused by the shadow economy can lead to increased revenue collection thus ultimately encouraging economic growth. Nevertheless, it is important to note that the activities of the shadow market lead to more detrimental effects the positive ones and so shouldn’t be, in any circumstances, be encouraged.
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