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Shadow economy revisited: logic, morality and intuition in corrupt practices and illegal channels

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  • Orkodashvili, Mariam

Abstract

The aim of the paper is to analyze how corruption contributes to the spread of shadow economy and damages viable economic development of any country. The unfreedoms that are created under the conditions of illegal transactions and corrupt practices considerably limit the opportunities of individuals to develop and use their capabilities (Sen, 2000) to the full extent and make their contribution to the development of their countries’ economies and sociocultural progress. The short-sighted desire to receive gain and extra revenue through illegal actions often obscures the capacity to comprehend the size and extent of the damage that such actions bring to the economic development of the country and sociocultural progress of the society in the long run. Under these conditions, the paper perceives logic (e.g. cost-benefit analysis, pragmatic calculations of profit-making, etc.), morality (i.e. ethical norms) and intuition (i.e. the intuitive decision whether to engage in illegal practices, where the estimation of the degrees of risk and confidence plays significant role) as three important human features that influence individuals’, corporations’ and governments’ decisions whether or not to engage directly or foster indirectly the cultivation of illegal practices. Therefore, the idea that the paper is trying to support is that while analyzing the instances of corruption on any given level (individual, organizational, governmental, or cross-country), the factors of logic, moral and intuition should be all taken into consideration in order to better understand such illegal actions, systems, channels and mechanisms and design more comprehensive fighting strategies against corruption than are offered today by numerous scholars, organizations or public bodies.

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File URL: http://mpra.ub.uni-muenchen.de/20391/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20391.

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Date of creation: 17 Jan 2010
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Handle: RePEc:pra:mprapa:20391

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Keywords: shadow economy; unofficial GDP; illegal income; corruption; illegal contracts and channels; economic development; economic growth; logic; ethical values; risk evaluation; intuition; corruption on individual; corporate and governmental levels.;

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  1. Graf Lambsdorff, Johann, 2005. "Consequences and causes of corruption: What do we know from a cross-section of countries?," Passauer Diskussionspapiere, Volkswirtschaftliche Reihe V-34-05, University of Passau, Faculty of Business and Economics.
  2. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(3), pages 681-712, August.
  3. Luis A. Sosa, 2004. "Wages and Other Determinants of Corruption," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 8(4), pages 597-605, November.
  4. Rose-Ackerman, Susan, 1975. "The economics of corruption," Journal of Public Economics, Elsevier, Elsevier, vol. 4(2), pages 187-203, February.
  5. Reinikka, Ritva & Svensson, Jakob, 2006. "Using Micro-Surveys to Measure and Explain Corruption," World Development, Elsevier, Elsevier, vol. 34(2), pages 359-370, February.
  6. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  7. Andersen, Torben M. & Beier, Niels C., 2005. "International transmission of transitory and persistent monetary shocks under imperfect information," Journal of International Economics, Elsevier, Elsevier, vol. 66(2), pages 485-507, July.
  8. Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, Elsevier, vol. 69(2), pages 263-279, June.
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