Fig. 3 shows how an improvement in judicial efficiency affects γi.
The increase in θ or φ (the first channel) reduces Amin to the new
value A'min. The increase in the return of HT projects (the second
channel) shifts the γ(Ai) function upwards. Hence, the new support
of the disclosure function is [A'min, Ā]. The size of the underground
economy shrinks because, in the new equilibrium, entrepreneurs
who previously were receiving credit, borrow more and disclose
more assets, while those who previously were credit rationed obtain
loans and disclose part of their assets