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Extortion and Informal Sector in a Small Open Economy

Author

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  • Marjit, Sugata
  • Mandal, Biswajit

Abstract

Informal economy involving unrecorded, unregistered, extra legal activities employs majority of the workforce in the developing world. Such extra legal existence of informal manufacturing and service sectors is facilitated through extortion by agents of political forces in power. Such extortion activities themselves constitute an informal segment. We develop a general equilibrium model to explore the possible consequences of a change in the degree of extortion, change in the quality of administration, tariff reform etc. Economic reform of various kinds has interesting effects on the size of the extortion sector. Various reformatory policies may actually lead to an expansion of the informal sector.

Suggested Citation

  • Marjit, Sugata & Mandal, Biswajit, 2010. "Extortion and Informal Sector in a Small Open Economy," MPRA Paper 25044, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:25044
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    References listed on IDEAS

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    Cited by:

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    2. Mandal, Biswajit & Roy, Sangita, 2018. "Inflow of Educational Capital, Intermediation and Informal Sector," MPRA Paper 87461, University Library of Munich, Germany.

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    More about this item

    Keywords

    International Trade; Extortion; General Equilibrium.;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • F1 - International Economics - - Trade

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