Corruption and hidden economy: Letting the fingerprints tell the story

Abstract

This paper develops a latent-variable model framework for corruption, and investigates the relationship between corruption and the hidden economy. With this model approach the 'fingerprints' that are left on various economic variables by corrupt activities is traced to estimate the ordinal values for corruption. Corruption is found to be positively related to the hidden economy, confirming the results by Johnson, Kaufmann and Zoido-Lobadon (1999). © EuroJournals, Inc. 2006.