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Price Adjustment Under the Table: Evidence on Efficiency-enhancing Corruption

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  • Daniel Levy

Abstract

Direct data on corruption and its prevalence is scarce because of the illegal nature of corruption. Based on first-hand account, this paper offers evidence on corrupt price setting and price adjustment mechanisms that were illegally employed under the Soviet regime. The evidence is anecdotal, and it is based on personal experience during the years 1960-1971 in the Republic of Georgia, while it was still a part of the former Soviet Union. The description of the social organization of the black markets and other illegal economic activities in Georgia that I offer, depicts the creative and sophisticated ways the people in the former Soviet Union were routinely using in order to overcome the problems of constant shortages created by the country's inefficient centrally-planned command economic price system with its distorted relative prices. The description of the specific cases and events and the details of illegal arrangements that were employed in Georgia's black markets, offers a glimpse of quite explicit micro-level evidence on various types of corruption that were common in Georgia, where rent-seeking behavior led to emergence of remarkably well-functioning black markets. The evidence I describe, underscores again the power of incentives in a rent-seeking society.

Suggested Citation

  • Daniel Levy, 2006. "Price Adjustment Under the Table: Evidence on Efficiency-enhancing Corruption," Emory Economics 0605, Department of Economics, Emory University (Atlanta).
  • Handle: RePEc:emo:wp2003:0605
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    Cited by:

    1. Noel D., Johnson & William, Ruger & Jason, Sorens & Steven, Yamarik, 2012. "Corruption as a response to regulation," MPRA Paper 36873, University Library of Munich, Germany.
    2. Toke S. Aidt, 2009. "Corruption, institutions, and economic development," Oxford Review of Economic Policy, Oxford University Press, vol. 25(2), pages 271-291, Summer.
    3. Campos, Nauro F & Dimova, Ralitza & Saleh, Ahmad, 2010. "Whither Corruption? A Quantitative Survey of the Literature on Corruption and Growth," CEPR Discussion Papers 8140, C.E.P.R. Discussion Papers.
    4. 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.
    5. Aidt, T.S., 2010. "Corruption and Sustainable Development," Cambridge Working Papers in Economics 1061, Faculty of Economics, University of Cambridge.
    6. Snir, Avichai & Levy, Daniel, 2010. "Economic Growth in the Potterian Economy," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 211-236.
    7. Johan, Sofia & Zhang, Minjie, 2016. "Private equity exits in emerging markets," Emerging Markets Review, Elsevier, vol. 29(C), pages 133-153.
    8. repec:wsi:jdexxx:v:22:y:2017:i:03:n:s1084946717500182 is not listed on IDEAS
    9. 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.
    10. repec:zbw:espost:176546 is not listed on IDEAS
    11. Breen, Michael & Gillanders, Robert, 2017. "Does Corruption Ease the Burden of Regulation? National and Subnational Evidence," MPRA Paper 82088, University Library of Munich, Germany.
    12. 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.
    13. 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.
    14. Kodila Tedika, Oasis, 2012. "Consequences De La Corruption : Panorama Empirique
      [Consequences of Corruption : Empirical survey]
      ," MPRA Paper 41482, University Library of Munich, Germany.
    15. 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.

    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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