The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Second Economy (Unofficial Economy)

  • Michael Alexeev
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_1982

Abstract

The second (shadow, unofficial) economy played a major role in Soviet-type economies (STEs) and served as a precursor of unofficial sectors in the transition economies. This article lists the main causes of the second economy, outlines approaches to its measurement, and examines its effect on the economic performance of the STEs. The main focus is on the unofficial economy during transition to markets. The article presents estimates of the unofficial economy, describes negative externalities that it generates, discusses reasons for its different size and dynamics in different countries, and outlines approaches to reducing it. Positive aspects of the unofficial economy are also noted.

Keywords

Bribery Command economy Corruption Developing economies Entrepreneurship Informal economy Liberalization Path dependency Price control Public goods Rationing Repressed inflation Rule of law Second economy Shadow economy Soviet economic reform Speculation State-owned enterprises Tax evasion Transfer pricing Transition and institutions Trust Unofficial economy Wealth effects 
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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Michael Alexeev
    • 1
  1. 1.