Informal Exchange Networks in Formal Systems: A Theoretical Model

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Abstract
Studies of the informal economy in the Third World have evolved toward defining the informal sector in relationship to the state. This article analyzes some activities that escape the control of the state, with special attention to centrally planned economies. Informal exchanges include bureaucratic favors (“connections”), clientelism, different forms of corruption, and the “parallel” system of production and marketing. I show that economic laws are not sufficient to understand the logic of these economies.