IDEAS home Printed from https://ideas.repec.org/h/pal/palchp/978-1-349-74092-5_10.html
   My bibliography  Save this book chapter

Why Do Firms Hide? Bribes and Unofficial Activity after Communism

In: The Economics of Transition

Author

Listed:
  • Simon Johnson
  • Daniel Kaufmann
  • John McMillan
  • Christopher Woodruff

Abstract

A substantial part of output in many developing and post-communist transition economies goes unreported. This ‘unofficial economy’ impedes economic growth in various ways. First, firms operating underground cannot make use of marketsupporting institutions like the courts and so may invest too little, as de Soto (1989) argues occurs in Peru. Second, doing business in secret generates distortions because of the effort needed to avoid detection and punishment. Resources that are hidden may not find their highest-value uses, as Shleifer and Vishny (1993) suggest happens in Africa. Third, under-reporting costs the government tax revenue that it might otherwise have put to worthwhile use. According to the Latin American evidence of Loayza (1996), a smaller underground sector is associated with higher tax collections, which pay for better public infrastructure and thus lead to faster economic growth.

Suggested Citation

  • Simon Johnson & Daniel Kaufmann & John McMillan & Christopher Woodruff, 2007. "Why Do Firms Hide? Bribes and Unofficial Activity after Communism," Palgrave Macmillan Books, in: Erik Berglöf & Gérard Roland (ed.), The Economics of Transition, chapter 10, pages 335-359, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-74092-5_10
    DOI: 10.1057/978-1-349-74092-5_10
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:palchp:978-1-349-74092-5_10. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.