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Underground Economy Estimation in Iran by Mimic Method

Author

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  • Soheila Kaghazian
  • Isa Zaghi Jojadeh
  • Yazdan Naghdi

Abstract

Underground economy, is all countries economy reality and forms a percent of each country`s economy and is the cause of many social and economic disorders that presents its existence in community with an unseen hand and is the cause of monetary and financial problems emergence and obscures economic data and makes inappropriate performance of economic policy therefore, due to the sensitivity of this phenomenon, this research measure the volume of smuggled goods during the years of (1974-2011) based on Lisrel software. In this study, for determining the size of the underground economy, firstly, its index has been determined by using MIMIC method in a ranked series of numbers and then for the sake of comparing different years, calibration and the previous studies were used to estimate the volume of relative and absolute underground economy. Based on mimic method, the average size of the underground economy during (1974-2011), was about 21% of official GDP. The results of this study show that the openness of the economy, inflation, education and the size of the government are considered main causes of the underground economy in Iran. The average size of the underground economy in past studies, was about 19% of GDP but in this study, it`s two percent higher than the average of the whole period.

Suggested Citation

  • Soheila Kaghazian & Isa Zaghi Jojadeh & Yazdan Naghdi, 2015. "Underground Economy Estimation in Iran by Mimic Method," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 90-109.
    • Handle: RePEc:bas:econst:y:2015:i:1:p:90-109
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    Cited by:

    1. Stefan Petranov & Dimitar Zlatinov & Ilia Atanasov, 2022. "The Shadow Economy in Bulgaria During the Period 2006-2019," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 5, pages 3-18.
    2. Stefan Petranov & Dimitar Zlatinov & Milen Velushev & Lillyana Georgieva & Radostina Ivcheva, 2022. "Shadow Economy and Production Factors: Results from an Empirical Analysis with a Panel Data Set," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 44-64.

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    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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