Illicit Activity and Money Laundering from an Economic Growth Perspective : A Model and an Application to Colombia
This paper contributes to the economic analysis of illicit activities and money laundering. First, it presents a theoretical model of long-run growth that explicitly considers illicit workers, activities, and income, alongside a licit private secto...
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| Format: | Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2016
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2016/02/25975794/illicit-activity-money-laundering-economic-growth-perspective-model-application-colombia http://hdl.handle.net/10986/23917 |
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okr-10986-23917 |
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| recordtype |
oai_dc |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
RISKS CAPITAL MARKETS UNEMPLOYMENT RATES TOTAL INVESTMENT FOREIGN CAPITAL MACROECONOMIC MODEL ECONOMIC GROWTH PRODUCTION RELATIVE PRICE CAPITAL ACCUMULATION STOCK DISPOSABLE INCOME INCOME INTEREST DEPRECIATION PUBLIC INVESTMENTS PERFECT COMPETITION EXPECTATIONS MONEY SUPPLY INTEREST RATE REAL GDP SUPPLIES DEPRECIATION RATE BANKING SYSTEM BALANCE OF PAYMENTS DOMESTIC MARKET EXPORTS NATIONAL SAVINGS ECONOMETRIC ESTIMATES ASSET RECESSION WELFARE OPTIMIZATION BONDS INCENTIVES EQUILIBRIUM GRAVITY MODEL WORLD MARKETS INDICATOR VARIABLES VARIABLES NEGATIVE EXTERNALITY MARGINAL PRODUCTIVITY CAPITAL STOCK CONSUMPTION DECISIONS REAL INCOME INPUTS RETURNS TO SCALE PAYMENTS WEALTH BANKRUPTCY AGGREGATE INCOME CENTRAL BANK DEVELOPMENT MONETARY INSTABILITY MACROECONOMIC STABILITY LABOR MARKET STEADY STATE SAVINGS TECHNICAL ASSISTANCE CURRENCY DEVELOPMENT ECONOMICS MAXIMUM LIKELIHOOD ESTIMATION ECONOMIC CRISES EXPENDITURE FUNCTION EXOGENOUS VARIABLES MONEY CURRENT ACCOUNT CURRENT ACCOUNT SURPLUS CONSTANT RETURNS TO SCALE SURPLUS EXCHANGE RATES BASE YEAR PRODUCTIVITY ECONOMETRICS IMPERFECT COMPETITION OVERLAPPING GENERATIONS MODEL MARKETS DEBT EXPENDITURE FUNCTIONS OPEN ECONOMY BUSINESS CYCLE TOTAL COSTS ECONOMICS LITERATURE IMPORTS REAL INTEREST RATE RECESSIONS GENERAL EQUILIBRIUM MODEL UTILITY GROSS DOMESTIC PRODUCT INVENTORY DISTORTIONS LIBERALIZATION TAXES UNEMPLOYMENT INCOME TAXES EXTERNALITY CONSUMPTION GENERAL EQUILIBRIUM RISK NEUTRAL MONETARY SUPPLY CAPITAL WAGES DISTORTION UNEMPLOYMENT RATE VALUE LONG-RUN EQUILIBRIUM MACROECONOMICS DUTCH DISEASE FOREIGN INVESTMENT DEMAND INVESTMENT LEVELS UTILITY FUNCTION CONSUMPTION GOODS AGGREGATE DEMAND REAL COST ECONOMY |
| spellingShingle |
RISKS CAPITAL MARKETS UNEMPLOYMENT RATES TOTAL INVESTMENT FOREIGN CAPITAL MACROECONOMIC MODEL ECONOMIC GROWTH PRODUCTION RELATIVE PRICE CAPITAL ACCUMULATION STOCK DISPOSABLE INCOME INCOME INTEREST DEPRECIATION PUBLIC INVESTMENTS PERFECT COMPETITION EXPECTATIONS MONEY SUPPLY INTEREST RATE REAL GDP SUPPLIES DEPRECIATION RATE BANKING SYSTEM BALANCE OF PAYMENTS DOMESTIC MARKET EXPORTS NATIONAL SAVINGS ECONOMETRIC ESTIMATES ASSET RECESSION WELFARE OPTIMIZATION BONDS INCENTIVES EQUILIBRIUM GRAVITY MODEL WORLD MARKETS INDICATOR VARIABLES VARIABLES NEGATIVE EXTERNALITY MARGINAL PRODUCTIVITY CAPITAL STOCK CONSUMPTION DECISIONS REAL INCOME INPUTS RETURNS TO SCALE PAYMENTS WEALTH BANKRUPTCY AGGREGATE INCOME CENTRAL BANK DEVELOPMENT MONETARY INSTABILITY MACROECONOMIC STABILITY LABOR MARKET STEADY STATE SAVINGS TECHNICAL ASSISTANCE CURRENCY DEVELOPMENT ECONOMICS MAXIMUM LIKELIHOOD ESTIMATION ECONOMIC CRISES EXPENDITURE FUNCTION EXOGENOUS VARIABLES MONEY CURRENT ACCOUNT CURRENT ACCOUNT SURPLUS CONSTANT RETURNS TO SCALE SURPLUS EXCHANGE RATES BASE YEAR PRODUCTIVITY ECONOMETRICS IMPERFECT COMPETITION OVERLAPPING GENERATIONS MODEL MARKETS DEBT EXPENDITURE FUNCTIONS OPEN ECONOMY BUSINESS CYCLE TOTAL COSTS ECONOMICS LITERATURE IMPORTS REAL INTEREST RATE RECESSIONS GENERAL EQUILIBRIUM MODEL UTILITY GROSS DOMESTIC PRODUCT INVENTORY DISTORTIONS LIBERALIZATION TAXES UNEMPLOYMENT INCOME TAXES EXTERNALITY CONSUMPTION GENERAL EQUILIBRIUM RISK NEUTRAL MONETARY SUPPLY CAPITAL WAGES DISTORTION UNEMPLOYMENT RATE VALUE LONG-RUN EQUILIBRIUM MACROECONOMICS DUTCH DISEASE FOREIGN INVESTMENT DEMAND INVESTMENT LEVELS UTILITY FUNCTION CONSUMPTION GOODS AGGREGATE DEMAND REAL COST ECONOMY Villa, Edgar Misas, Martha A. Loayza, Norman V. Illicit Activity and Money Laundering from an Economic Growth Perspective : A Model and an Application to Colombia |
| geographic_facet |
Latin America & Caribbean Colombia |
| relation |
Policy Research Working Paper;No. 7578 |
| description |
This paper contributes to the economic
analysis of illicit activities and money laundering. First,
it presents a theoretical model of long-run growth that
explicitly considers illicit workers, activities, and
income, alongside a licit private sector and a functioning
government. Second, it generates estimates of the size of
illicit income and provides simulated and econometric
estimates of the volume of laundered assets in the Colombian
economy. In the model, the licit sector operates in a
perfectly competitive environment and produces a licit good
through a standard neoclassical production function. The
illicit sector operates in an imperfectly competitive
environment and is composed of two different activities: The
first activity produces an illicit good that nonetheless is
valuable in the market (for example illicit drugs); the
second does not add value to the economy but only
redistributes wealth (for example robbery, kidnapping, and
fraud). The paper provides a series of comparative statics
exercises to assess the effects of changes in government
efficiency, licit sector productivity, and illicit drug
prices. From the model, the analysis derives a set of
estimable macroeconometric equations to measure the size of
laundered assets in the Colombian economy in the period 1985
to 2013. The paper assembles a data set whose key components
are estimates of illicit income from drug trafficking and
common crime. Illicit incomes increased drastically until
2001, reaching a peak of nearly 12 percent of gross domestic
product and then decreasing to less than 2 percent by 2013.
The decline overlaps not only in a period of high economic
growth, but also after the implementation of Plan Colombia.
The data set is used to estimate the volume of laundered
assets in the economy by applying the Kalman filter for the
estimation of unobserved dynamic variables onto the derived
macroeconometric equations from the model. The findings show
that the volume of laundered assets increased from about 8
percent of gross domestic product in the mid-1980s to a peak
of 14 percent by 2002, and declined to 8 percent in 2013. |
| format |
Working Paper |
| author |
Villa, Edgar Misas, Martha A. Loayza, Norman V. |
| author_facet |
Villa, Edgar Misas, Martha A. Loayza, Norman V. |
| author_sort |
Villa, Edgar |
| title |
Illicit Activity and Money Laundering from an Economic Growth Perspective : A Model and an Application to Colombia |
| title_short |
Illicit Activity and Money Laundering from an Economic Growth Perspective : A Model and an Application to Colombia |
| title_full |
Illicit Activity and Money Laundering from an Economic Growth Perspective : A Model and an Application to Colombia |
| title_fullStr |
Illicit Activity and Money Laundering from an Economic Growth Perspective : A Model and an Application to Colombia |
| title_full_unstemmed |
Illicit Activity and Money Laundering from an Economic Growth Perspective : A Model and an Application to Colombia |
| title_sort |
illicit activity and money laundering from an economic growth perspective : a model and an application to colombia |
| publisher |
World Bank, Washington, DC |
| publishDate |
2016 |
| url |
http://documents.worldbank.org/curated/en/2016/02/25975794/illicit-activity-money-laundering-economic-growth-perspective-model-application-colombia http://hdl.handle.net/10986/23917 |
| _version_ |
1764455118610104320 |
| spelling |
okr-10986-239172021-04-23T14:04:18Z Illicit Activity and Money Laundering from an Economic Growth Perspective : A Model and an Application to Colombia Villa, Edgar Misas, Martha A. Loayza, Norman V. RISKS CAPITAL MARKETS UNEMPLOYMENT RATES TOTAL INVESTMENT FOREIGN CAPITAL MACROECONOMIC MODEL ECONOMIC GROWTH PRODUCTION RELATIVE PRICE CAPITAL ACCUMULATION STOCK DISPOSABLE INCOME INCOME INTEREST DEPRECIATION PUBLIC INVESTMENTS PERFECT COMPETITION EXPECTATIONS MONEY SUPPLY INTEREST RATE REAL GDP SUPPLIES DEPRECIATION RATE BANKING SYSTEM BALANCE OF PAYMENTS DOMESTIC MARKET EXPORTS NATIONAL SAVINGS ECONOMETRIC ESTIMATES ASSET RECESSION WELFARE OPTIMIZATION BONDS INCENTIVES EQUILIBRIUM GRAVITY MODEL WORLD MARKETS INDICATOR VARIABLES VARIABLES NEGATIVE EXTERNALITY MARGINAL PRODUCTIVITY CAPITAL STOCK CONSUMPTION DECISIONS REAL INCOME INPUTS RETURNS TO SCALE PAYMENTS WEALTH BANKRUPTCY AGGREGATE INCOME CENTRAL BANK DEVELOPMENT MONETARY INSTABILITY MACROECONOMIC STABILITY LABOR MARKET STEADY STATE SAVINGS TECHNICAL ASSISTANCE CURRENCY DEVELOPMENT ECONOMICS MAXIMUM LIKELIHOOD ESTIMATION ECONOMIC CRISES EXPENDITURE FUNCTION EXOGENOUS VARIABLES MONEY CURRENT ACCOUNT CURRENT ACCOUNT SURPLUS CONSTANT RETURNS TO SCALE SURPLUS EXCHANGE RATES BASE YEAR PRODUCTIVITY ECONOMETRICS IMPERFECT COMPETITION OVERLAPPING GENERATIONS MODEL MARKETS DEBT EXPENDITURE FUNCTIONS OPEN ECONOMY BUSINESS CYCLE TOTAL COSTS ECONOMICS LITERATURE IMPORTS REAL INTEREST RATE RECESSIONS GENERAL EQUILIBRIUM MODEL UTILITY GROSS DOMESTIC PRODUCT INVENTORY DISTORTIONS LIBERALIZATION TAXES UNEMPLOYMENT INCOME TAXES EXTERNALITY CONSUMPTION GENERAL EQUILIBRIUM RISK NEUTRAL MONETARY SUPPLY CAPITAL WAGES DISTORTION UNEMPLOYMENT RATE VALUE LONG-RUN EQUILIBRIUM MACROECONOMICS DUTCH DISEASE FOREIGN INVESTMENT DEMAND INVESTMENT LEVELS UTILITY FUNCTION CONSUMPTION GOODS AGGREGATE DEMAND REAL COST ECONOMY This paper contributes to the economic analysis of illicit activities and money laundering. First, it presents a theoretical model of long-run growth that explicitly considers illicit workers, activities, and income, alongside a licit private sector and a functioning government. Second, it generates estimates of the size of illicit income and provides simulated and econometric estimates of the volume of laundered assets in the Colombian economy. In the model, the licit sector operates in a perfectly competitive environment and produces a licit good through a standard neoclassical production function. The illicit sector operates in an imperfectly competitive environment and is composed of two different activities: The first activity produces an illicit good that nonetheless is valuable in the market (for example illicit drugs); the second does not add value to the economy but only redistributes wealth (for example robbery, kidnapping, and fraud). The paper provides a series of comparative statics exercises to assess the effects of changes in government efficiency, licit sector productivity, and illicit drug prices. From the model, the analysis derives a set of estimable macroeconometric equations to measure the size of laundered assets in the Colombian economy in the period 1985 to 2013. The paper assembles a data set whose key components are estimates of illicit income from drug trafficking and common crime. Illicit incomes increased drastically until 2001, reaching a peak of nearly 12 percent of gross domestic product and then decreasing to less than 2 percent by 2013. The decline overlaps not only in a period of high economic growth, but also after the implementation of Plan Colombia. The data set is used to estimate the volume of laundered assets in the economy by applying the Kalman filter for the estimation of unobserved dynamic variables onto the derived macroeconometric equations from the model. The findings show that the volume of laundered assets increased from about 8 percent of gross domestic product in the mid-1980s to a peak of 14 percent by 2002, and declined to 8 percent in 2013. 2016-03-09T22:35:03Z 2016-03-09T22:35:03Z 2016-02 Working Paper http://documents.worldbank.org/curated/en/2016/02/25975794/illicit-activity-money-laundering-economic-growth-perspective-model-application-colombia http://hdl.handle.net/10986/23917 English en_US Policy Research Working Paper;No. 7578 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Latin America & Caribbean Colombia |