Corruption, Centralization, and the Shadow Economy
AbstractIn their pioneering work on corruption, Shleifer and Vishny (1993) find that a centralized bureaucracy results in lower bribes. Our paper extends the analysis to economies with formal and informal sectors. When corrupt officials operate in both sectors, bureaucratic centralization is beneficial when confined to the formal sector; however, we show that crosssector centralization can result in higher bribes and lower welfare. Furthermore, contrary to Choi and Thum (2005), we demonstrate that, depending on the organization of the bureaucracy and the productivity of the informal sector, the presence of the shadow economy may have adverse effects on corruption and welfare.
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Bibliographic InfoArticle provided by Southern Economic Association in its journal Southern Economic Journal.
Volume (Year): 75 (2008)
Issue (Month): 2 (October)
Find related papers by JEL classification:
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
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- Schneider, Friedrich G. & Buehn, Andreas, 2007. "Shadow economies and corruption all over the world: revised estimates for 120 countries," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 1(9 (Versio), pages 1-53.
- Roberto Dell'Anno & Désirée Teobaldelli, 2012. "Keeping both Corruption and the Shadow Economy in Check: The Role of Decentralization," Working Papers 1213, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2012.
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