The causes and consequences of corruption have attracted much attention in recent years by both academics and policy makers. Central in the discussion on the impact of corruption are perception-based indices. While informative, these indices are ordinal in nature and hence provide no indication...

This paper analyzes a simple model that captures the relationship between institutional quality, the shadow economy and corruption. It shows that an improvement in institutional quality reduces the shadow economy and affects the corruption market. The exact relationship between corruption and...