This paper develops a simple framework to analyze the links between corruption and the unofficial economy and their implications for the official economy. In a model of self-selection with heterogeneous entrepreneurs, we show that the entrepreneurs option to flee to the underground economy...

This paper develops a simple framework to analyze the links between corruption and the unofficial economy and their implications for the official economy. In a model of self-selection with heterogeneous entrepreneurs, we show that the entrepreneurs' option to flee to the underground economy...

This paper provides a simple model of corruption dynamics with the ratchet effect. As in Shleifer and Vishny (1993), we consider the sale of government property (entry permit) by government officials as the prototype of corruption activities. In a dynamic version of the Shleifer-Vishny model,...

This paper provides a simple model of corruption dynamics with the ratchet effect. As in Shleifer and Vishny [1993], we consider the sale of government property (entry permit) by government officials as the prototype of corruption activities. In a dynamic version of the Shleifer-Vishny model,...