Countries With the Largest Shadow Economies 🕶️

Key Takeaways

• China is estimated to have the largest in the world, at $3.6 trillion, representing underground activity outside of the government's view.
• Although it represents just 5% of GDP, the U.S. has the world’s second-largest shadow economy, estimated at $1.4 trillion. States with lower real GDP and higher regulatory burdens tend to have more active underground economies.
• India ranks in third, with a shadow economy valued at $931 billion.

The Massive Scale of the Underground Economy

While measuring the size of show economy activity is challenging, Ernst & Young used more than 70 variables to analyze these unobserved activities to understand their role in 131 countries.

For years, the informal economy has driven the strongest demand for cash, especially high-denomination bills.

China, the U.S, and India have the largest globally—covering informal activities such as street vendors and illegal activities like drug trafficking.

Brazil leads in Latin America, with a shadow economy valued at $448 billion while Germany has the largest in Europe, at $308 billion.