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Technische Universität Dresden >
Fakultät Wirtschaftswissenschaften, Technische Universität Dresden >
Dresden Discussion Paper Series in Economics, Faculty of Business and Economics, TU Dresden >
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http://hdl.handle.net/10419/48125
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| Title: | | Corruption and the shadow economy  |
| Authors: | | Choi, Jay Pil Thum, Marcel |
| Issue Date: | | 2003 |
| Series/Report no.: | | Dresden discussion paper in economics 02/03 |
| Abstract: | | 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. |
| Subjects: | | corruption shadow economy official economy self-selection |
| JEL: | | D9 H2 K4 L1 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Dresden Discussion Paper Series in Economics, Faculty of Business and Economics, TU Dresden
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