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Price adjustment under the table: Evidence on efficiency-enhancing corruption

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  • Levy, Daniel

Abstract

Based on first-hand account, this paper offers evidence on price setting and price adjustment mechanisms that were illegally employed under the Soviet planning and rationing regime. The evidence is anecdotal, and is based on personal experience during the years 1960–1971 in the Republic of Georgia. The description of the social organization of the black markets and other illegal economic activities that I offer depicts the creative and sophisticated ways that were used to confront the shortages created by the inefficient centrally-planned command economic price system with its distorted relative prices. The evidence offers a glimpse of quite explicit micro-level evidence on various types of behavior and corruption that were common in Georgia. Rent-seeking behavior, however, led to emergence of remarkably well-functioning and efficiency enhancing black markets. The evidence, thus, underscores once again the role of incentives in a rent-seeking society.
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  • Levy, Daniel, 2007. "Price adjustment under the table: Evidence on efficiency-enhancing corruption," European Journal of Political Economy, Elsevier, vol. 23(2), pages 423-447, June.
  • Handle: RePEc:eee:poleco:v:23:y:2007:i:2:p:423-447
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    Cited by:

    1. Turhan Kaymak & Eralp Bektas, 2015. "Corruption in Emerging Markets: A Multidimensional Study," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 124(3), pages 785-805, December.
    2. Snir, Avichai & Levy, Daniel, 2010. "Economic Growth in the Potterian Economy," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 211-236.
    3. repec:wsi:jdexxx:v:22:y:2017:i:03:n:s1084946717500182 is not listed on IDEAS
    4. Breen, Michael & Gillanders, Robert, 2017. "Does Corruption Ease the Burden of Regulation? National and Subnational Evidence," MPRA Paper 82088, University Library of Munich, Germany.
    5. Habibov, Nazim & Cheung, Alex, 2016. "The impact of unofficial out-of-pocket payments on satisfaction with education in Post-Soviet countries," International Journal of Educational Development, Elsevier, vol. 49(C), pages 70-79.
    6. Pál Csapodi & István Takács & Katalin György-Takács, 2011. "Corruption as a Deviant Social Attitude," Public Finance Quarterly, State Audit Office of Hungary, vol. 56(1), pages 27-43.
    7. Noel D., Johnson & William, Ruger & Jason, Sorens & Steven, Yamarik, 2012. "Corruption as a response to regulation," MPRA Paper 36873, University Library of Munich, Germany.
    8. Toke S. Aidt, 2009. "Corruption, institutions, and economic development," Oxford Review of Economic Policy, Oxford University Press, vol. 25(2), pages 271-291, Summer.
    9. Campos, Nauro F & Dimova, Ralitza & Saleh, Ahmad, 2010. "Whither Corruption? A Quantitative Survey of the Literature on Corruption and Growth," IZA Discussion Papers 5334, Institute for the Study of Labor (IZA).
    10. Johan, Sofia & Zhang, Minjie, 2016. "Private equity exits in emerging markets," Emerging Markets Review, Elsevier, vol. 29(C), pages 133-153.
    11. repec:zbw:espost:176546 is not listed on IDEAS
    12. Noel Johnson & William Ruger & Jason Sorens & Steven Yamarik, 2014. "Corruption, regulation, and growth: an empirical study of the United States," Economics of Governance, Springer, vol. 15(1), pages 51-69, February.
    13. Aidt, T.S., 2010. "Corruption and Sustainable Development," Cambridge Working Papers in Economics 1061, Faculty of Economics, University of Cambridge.
    14. Daniel Hain & Sofia Johan & Daojuan Wang, 2016. "Determinants of Cross-Border Venture Capital Investments in Emerging and Developed Economies: The Effects of Relational and Institutional Trust," Journal of Business Ethics, Springer, vol. 138(4), pages 743-764, November.
    15. Kodila Tedika, Oasis, 2012. "Consequences De La Corruption : Panorama Empirique
      [Consequences of Corruption : Empirical survey]
      ," MPRA Paper 41482, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • D30 - Microeconomics - - Distribution - - - General
    • B14 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Socialist; Marxist
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy

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