Extortion and Informal Sector in a Small Open Economy

Sugata Marjit and Biswajit Mandal

MPRA Paper from University Library of Munich, Germany

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.

Keywords: International Trade; Extortion; General Equilibrium. (search for similar items in EconPapers)
JEL-codes: D5 D73 F1 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (2)

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