Estimate Size of Underground Economy in Selected Developing Countries with Natural Resource Abundance

Document Type : Research Paper

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Abstract

Todays, underground economy has been changed into an unavoidable problem for many world's economies (especially in developing). This subject has a significant effect on macro variables of economy and causes to distortion of formal indexes. So exact estimation of this phenomenon regardless of its difficulty in order to exact economy policy making is necessary. So, goal of this study is estimating size of underground economy in selected developing countries with natural resource abundance during 2004-2015 through multiple reasons approach – Multiple effects (MIMIC) and lisrel software. Results of estimating the underground economy show size of underground economy in selected developing countries with natural resource abundance has been unstable during reviewing period. But, in general, this trend is increasing. Average size of underground economy during 12 years was 26.72% gross domestic product. Also, estimates results indicate unemployment, abundant natural resources, freedom of economy index, economy openness index, input flow of foreign direct investment and income per capita has effect on underground economy of selected developing countries. Among these, unemployment rate has the most positive effect and economy openness index has the most negative effect on underground economy. While inflation rate, direct tax burden, interest rate don’t have significant effect on emergence of this phenomenon in above mentioned countries. Also, between the two variables of the effects of the official economy and the demand for money in circulation, the most effect of underground economy is on the product market (formal economy). The effect is negative and significant in selected developing countries with abundant natural resources.
 

Keywords

References

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new economy and trad
Volume 15, Issue 3
March 2021
Pages 51-80

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History

  • Receive Date: 15 April 2020
  • Revise Date: 01 June 2020
  • Accept Date: 12 July 2020

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