Underground Economies: Human Trafficking an Application

Topics Definition and variations Accounting for size Problems posed Factors for development An application: Human trafficking

Definition Includes all economic activities that are not registered It’s flexible “Informal” v. “Underground” v. “Criminal” Legal v. Illegal –“Criminal” debate

Definition 4 Categories: –Activities yielding income that’s not reported –Productions that violates one or more mandates –Productive activity transfer beneficiaries who draw Soc. Security or public assistance –Productive activity by illegal aliens From Hans F. Senholz. “The Underground Economy”

Determining Extent Methods: -Direct approach: interview, tax audit -Indirect approach: Currency demand, Household electricity model -Soft model approach: cross-section and time series analysis

A State in Transition Weakened government due to collapse of Soviet Union Post perestroika instability Organized crime accounting for an estimated 40% of Russia’s GDP

Human Trafficking “Criminal Economy” -based on breaking fundamental laws

Economic Factors Humans as a commodity Unpaid labor Untaxed income Globalization as a means of increase Out migration of potential workers

Accounting Criminal Economy in the underground is the most difficult to account for Methods used to estimate extent –Open interviews –