Corruption and the Shadow Economy

By Jay Pil Choi, Marcel Thum. Social Science Research Network, 2005

246 citations recorded by the source corpus.

This paper develops a simple framework to analyze the links between corruption and the unofficial economy and their implications for the official economy. In a model of self-selection with heterogeneous entrepreneurs, we show that the entrepreneurs' option to flee to the underground economy constrains a corrupt official's ability to introduce distortions to the economy for private gains. The unofficial economy thus mitigates government-induced distortions and, as a result, leads to enhanced economic activities in the official sector. In this sense, the presence of the unofficial sector acts as a complement to the official economy rather than a substitute.

Subfields: Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/80661f33ac5272afaa06c9691da9fab830e54574

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Citations in the corpus

Corruption and the shadow economy: like oil and vinegar, like water and fire? (2011, unknown): “Thus, similar to the findings of Choi and Thum (2005) , corruption is lower in the presence of a shadow economy.”
Which Institutions Encourage Entrepreneurial Growth Aspirations (2013, background): “…environment will have adapted their behaviour to the corresponding informal norms in order to limit the negative effects of corrupt practices (Choi and Thum, 2005; Tonoyan et al., 2010) 4 Seen this way, corruption is an example of a social element that can become institutionalised without…”
The Influence of Public Institutions on the Shadow Economy: An Empirical Investigation for OECD Countries (2010, unknown): “14 E.g. Johnson et al. (1998a,b), Friedman et al. (2000), Dreher and Schneider (2010), Dreher, Kotsogiannis and McCorriston (2009).”
Pollution, Shadow Economy and Corruption: Theory and Evidence (2012, unknown): “These results are in line with the findings of Cole et al. (1997). However, having included the shadow economy variable, we should be cautious in interpreting the coefficient of the income variables because there is a relatively high correlation between the logarithm of the GDP per capita and the lo”
CAUSES AND EFFECTS OF CORRUPTION: WHAT HAS PAST DECADE'S EMPIRICAL RESEARCH TAUGHT US? A SURVEY (2018, unknown): “An early study created a model that suggested that corruption and shadow markets are substitutes (Choi and Thum, 2005), this received support in a later paper that re-examined the relationship (Dreher et al.”
Taxing the unobservable: The impact of the shadow economy on inflation and taxation (2017, unknown): “by Choi and Thum (2005) or Dreher et”
Corruption and the shadow economy: an empirical analysis (2010, methodology): “Choi and Thum (2005) present a model where the option of entrepreneurs to go underground constrains a corrupt official's ability to ask for bribes.”
Informal sector: The credit market channel (2005, background): “…example Loayza (1995), Marcouiller and Young (1995), Johnson, Kaufmann and Shleifer (1997), Friedman, Johnson, Kaufmann and Zoido-Lobatón (2000), Choi and Thum (2002) and Azuma and Grossman (2002). of finance companies: “One of our clients was heavily indebted with several creditors, including…”