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Multiple unofficial economy equilibria and income distribution dynamics in systemic transition

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  • J. Barkley Rosser Jr
  • Marina V. Rosser
  • Ehsan Ahmed

Abstract

Large increases in unofficial economies in many transition economies arise from a dynamic interaction with rising income inequality and public sector changes in a multiple equilibria system. Returns to unofficial activity are first increasing and then decreasing, implying two distinct stable equilibria, with changes in inequality possibly causing a jump from one to the other. Multiple regressions of data from 18 transition economies find income inequality significantly correlated with the size of the unofficial economy, with the maximum annual rate of inflation also significantly correlated. The latter appears to be the only significant correlate with the increase in the size of the unofficial economy.

Suggested Citation

  • J. Barkley Rosser Jr & Marina V. Rosser & Ehsan Ahmed, 2003. "Multiple unofficial economy equilibria and income distribution dynamics in systemic transition," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 25(3), pages 425-447.
  • Handle: RePEc:mes:postke:v:25:y:2003:i:3:p:425-447
    DOI: 10.1080/01603477.2003.11051363
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    Citations

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    Cited by:

    1. Deniz ZUNGUN & Emine Turkan AYVAZ GUVEN & Florina Oana VIRLANUTA & Ozge ONKAN, 2015. "The Major Obstacle to Economic Growth for EU Countries: Unequal Income Distribution," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 42-51.
    2. Lewis S. Davis, 2004. "Explaining the Evidence on Inequality and Growth: Informality and Redistribution," DEGIT Conference Papers c009_032, DEGIT, Dynamics, Economic Growth, and International Trade.
    3. Maurizio Bovi & Roy Cerqueti, 2014. "A quantitative view on policymakers’ goal, institutions and tax evasion," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(3), pages 1493-1510, May.
    4. Diego Winkelried, 2005. "Income Distribution and the Size of the Informal Sector," Development and Comp Systems 0512005, EconWPA.
    5. Verónica Amarante & Rodrigo Arim & Mijail Yapor, 2016. "Decomposing inequality changes in Uruguay: the role of formalization in the labor market," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-20, December.
    6. J. B. Rosser-Jr. & M. Rosser., 2009. "A Critique of the New Comparative Economics," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 8.
    7. Nikopour, Hesam & Shah Habibullah, Muzafar, 2010. "Shadow Economy and Poverty," MPRA Paper 23599, University Library of Munich, Germany.
    8. repec:voj:journl:v:63:y:2016:i:3:p:293-312 is not listed on IDEAS
    9. D’Hernoncourt, Johanna & Méon, Pierre-Guillaume, 2012. "The not so dark side of trust: Does trust increase the size of the shadow economy?," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 97-121.
    10. Çule, Monika & Fulton, Murray, 2009. "Business culture and tax evasion: Why corruption and the unofficial economy can persist," Journal of Economic Behavior & Organization, Elsevier, vol. 72(3), pages 811-822, December.
    11. Roberto Dell'Anno & Adalgiso Amendola, 2008. "Istituzioni, Diseguaglianza ed Economia Sommersa: quale relazione?," Quaderni DSEMS 24-2008, Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia.
    12. Maurizio Bovi & Roberto Dell’Anno, 2010. "The changing nature of the OECD shadow economy," Journal of Evolutionary Economics, Springer, vol. 20(1), pages 19-48, January.
    13. Chiara Binelli, 2016. "Wage inequality and informality: evidence from Mexico," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-18, December.

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