Shadow economy revisited: logic, morality and intuition in corrupt practices and illegal channels

Orkodashvili, Mariam (2010): Shadow economy revisited: logic, morality and intuition in corrupt practices and illegal channels.

Abstract

The aim of the paper is to analyze how corruption contributes to the spread of shadow economy and damages viable economic development of any country. The unfreedoms that are created under the conditions of illegal transactions and corrupt practices considerably limit the opportunities of individuals to develop and use their capabilities (Sen, 2000) to the full extent and make their contribution to the development of their countries’ economies and sociocultural progress. The short-sighted desire to receive gain and extra revenue through illegal actions often obscures the capacity to comprehend the size and extent of the damage that such actions bring to the economic development of the country and sociocultural progress of the society in the long run. Under these conditions, the paper perceives logic (e.g. cost-benefit analysis, pragmatic calculations of profit-making, etc.), morality (i.e. ethical norms) and intuition (i.e. the intuitive decision whether to engage in illegal practices, where the estimation of the degrees of risk and confidence plays significant role) as three important human features that influence individuals’, corporations’ and governments’ decisions whether or not to engage directly or foster indirectly the cultivation of illegal practices. Therefore, the idea that the paper is trying to support is that while analyzing the instances of corruption on any given level (individual, organizational, governmental, or cross-country), the factors of logic, moral and intuition should be all taken into consideration in order to better understand such illegal actions, systems, channels and mechanisms and design more comprehensive fighting strategies against corruption than are offered today by numerous scholars, organizations or public bodies.

• Item Type: MPRA Paper
• Language: English
• Keywords: shadow economy; unofficial GDP; illegal income; corruption; illegal contracts and channels; economic development; economic growth; logic; ethical values; risk evaluation; intuition; corruption on individual, corporate and governmental levels.
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q2 - Renewable Resources and Conservation > Q28 - Government Policy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q0 - General > Q01 - Sustainable Development; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z13 - Economic Sociology ; Economic Anthropology ; Social and Economic Stratification; P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P28 - Natural Resources ; Energy ; Environment; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L14 - Transactional Relationships ; Contracts and Reputation ; Networks; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements; A - General Economics and Teaching > A1 - General Economics > A13 - Relation of Economics to Social Values; K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O12 - Microeconomic Analyses of Economic Development

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