Gray economy definition
/What is the Gray Economy?
The gray economy includes any economic activity that is legal, but which is unrecorded and unregulated. These transactions frequently involve arbitrage opportunities where there is a disparity in price points across geographic regions. These transactions are not recorded in the official statistics for economic activity, so that a country’s reported economic activity tends to be underreported. There is no clear way to gain a perfect understanding of the amount of activity within the gray economy.
Example of the Gray Economy
An example of the gray economy is goods bought in one country by tourists and sold when they return home for a higher price. Thus, a cell phone may sell for $1,000 in Argentina and $500 in the United States, so an Argentine tourist buys several phones while in the United States for $500 each, and then resells them when he returns home, perhaps for a price somewhat lower than the $1,000 list price in Argentina. This activity will continue as long as the pricing differential between the countries makes it sufficiently profitable for the Argentine tourist to continue this behavior.