Causes And Countermeasures Of Underground Economy

The underground economy(UE)is the general term that describes business activity avoiding the government supervision and management for the purposes of tax evasion.The output and income of UE is not included in the Gross National Product.With the rapid development of the social progress,the problem of the UE in China has become more and more serious,which has seriously disturbed the economic stability and social harmony.This article research on the specific phenomenon of UE-unlicensed public places(public places engage in business activities without a hygienic license)to illustrate the sociology reason and the economic principles of UE,and raise some strategies to comprehensive control it.Firstly,based on investigation to the phenomenon of unlicensed public places management,combine with the management situation and features of it,this paper conduct an in-depth analysis to interpret the sociology reason of unlicensed public places using empirical analysis.Secondly,using economic analysis methods,this paper offers a general analysis on unlicensed public places management from the perspectives of consumers(consumer's preference),unlicensed public places proprietors(rational economic man),market(the supply and demand),and the game between unlicensed public places proprietors and law enforcement agencies.For proprietors,unlicensed business activity is the rational choice for the reason of the high cost of law-abiding and the low cost of illegal.Besides,most of the consumers have no idiosyncratic preferences of licensed public places(public places obtained hygienic license)Study of unlicensed public places business activity shows that,the underground economy is a natural outcome of our country in the development of social economy.To solve the problem of the underground economy,the government should respect the law of market,reduce the cost of law-abiding,increase the cost of illegal,and change consumer preferences and other economic means.