Grey Market exists in a market where is bought and sold outside of the manufacturer’s authorized trading channels. This differs from a black market, because products are legal in a grey market. Black markets exist in markets when illegal products are sold, such as drugs, stolen goods, etc. An example of a grey market would be someone selling a product he’s not licensed to sell, such as insurance. Grey-market goods are often new, but some grey market goods areused goods. A market in used goods is sometimes nicknamed a Green Market.
Because of the nature of grey markets, it is difficult or impossible to track the precise numbers of grey-market sales. Contrary to many opinions, indicating the relationship of occurrence of the shadow economy with the economies of developing countries, it has a universal character. Evidenced by the fact that its existence well as in countries with highly developed economies, including the most developed EU countries. According to report published by the European Commission, the gray area of the old EU countries (15 countries) is less than in the newly adopted. For example, for Italy, the percentage of persons deriving income in the gray zone is about 16-17% GDP, while in Greece, even above 20% GDP. The lowest in this respect is the result in such countries as Austria, the Netherlands and the UK, where it does not exceed 15% GDP. For countries that joined the EU on 1 May 2004 or later, the level of gray economy also reaches about 20 percent. GDP (Poland, Czech Republic), while in the case of Bulgaria and Romania more than 30 percent. GDP.
In the countries of Central – Eastern Europe can easily find an explanation for this: the operation for several years in the centrally planned economies. However, the example of Greece shows that the reasons are not clear and easy to identify. Certainly, there are several important other factors such as attitude to the law, a sense of fairness of the existing regulations and the amount of labor costs and burdens associated with running a business. This last factor seems to be crucial. Many traders prefer to give a substantial part of the pay privately, than to implement the so-called fact. the tax wedge (the worker receives in the hand only half of what is the cost of his employment by the employer). Add to this nuisance bureaucratic procedures, it appears that many times for both sides of the employment relationship (employer and employee) is preferable to work without formal requirements.
Undeclared work in construction or agriculture, is one side of the gray market. The second is to avoid paying taxes. In many transactions, including buying and selling houses, smaller part of the consideration is officially credited to your account (it is taxed), the rest is payment in cash.
But not always gray area is harmful – it can soften the impact of recession on the official economy. When earnings fall, increases the desire to move to the shadow. This is a special kind of insurance, out of a difficult situation. The growth of the shadow economy is often affected by globalization and increasing the burden imposed on employers by European governments.