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Second Economy (Unofficial Economy)

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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.

This chapter was originally published in The New Palgrave Dictionary of Economics, 2nd edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume

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  1. http://link.springer.com/referencework/10.1057/978-1-349-95121-5

    Michael Alexeev

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    Alexeev, M. (2008). Second Economy (Unofficial Economy). In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_1982-1

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    • DOI: https://doi.org/10.1057/978-1-349-95121-5_1982-1

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    • Online ISBN: 978-1-349-95121-5

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