In the shadow: illegal markets and economic sociology

Abstract

Illegal markets differ from legal markets in many respects. Although illegal markets have economic significance and are of theoretical importance, they have been largely ignored by economic sociology. In this article we propose a categorization for illegal markets and highlight reasons why certain markets are outlawed. We perform a comprehensive review of the literature to characterize illegal markets along the three coordination problems of value creation, competition, and cooperation. The article concludes by appealing to economic sociology to strengthen research on illegal markets and by suggesting areas for future empirical research.

Debts and Threats: Managing Inability to Repay Credits in Illicit Drug Distribution

“…Based on empirical data from this study, we propose that there is a continuum of strategies and outcomes from inability to repay drug debts in the illicit economy. Bringing together Nooteboom's (1996) modes of governance, Jacques's (2010) conditions for retaliation in drug markets, and Beckert and Wehinger's (2013) comparison of legal and illegal markets, we suggest a theoretical model for the relationship between modes of governance and outcomes of unpaid drug debt ( Figure 1). …”

“…In economic sociological theory, transactions are analyzed as embedded in interpersonal social network ties (Beckert & Wehinger, 2013;Granovetter, 1985). This embeddedness is a matter of degree depending on how much exchange partners consider each other's needs and how much trust and information they share.…”

“…In illicit economies, the underlying problems of information constraints and uncertainty from deferred repayment are similar to the problems with credit in legal markets; however, in illicit markets disputes have to be resolved without legal support (Beckert & Wehinger, 2013). The creditor must also monitor the repayment process using only informal means of social control, interpersonal trust and reputational concerns (Rosenfeld, Jacobs, & Wright, 2003; but see Jacobs, 2000).…”

Organized crime and illegal gambling: How do illegal gambling enterprises respond to the challenges posed by their illegality in China?

“…Making a clear estimation of the size of illegal markets is difficult, because unlawful entrepreneurs do not publish revenue and profit figures (Beckert and Wehinger, 2013), but existing sources (e.g. news reports, journal articles and books) enable researchers to identify some of the major challenges illegal enterprises have to confront and the strategies these enterprising entities tend to adopt.…”

Informal Economy in Russia: A Brief Overview

“…They deal with the goods and services prohibited by the law (drug trafficking, prostitution, etc). Studying these markets is highly relevant for economic sociology (Beckert, Wehinger, 2011).…”