Size and Causes of the Shadow Economy in Iran: An Analysis with the MIMIC Approach

This study aims to estimate the size of Iranian Shadow Economy (SE) using multiple indicators causes (MIMIC) approach, a variant structural equation modeling (SEM) approach. The application MIMIC approach allows for consideration established drivers SE as well potential that might be particular importance SE, namely inflation and construction sector in economy, latter which is considered this first time. significant determinants are found inflation, unemployment, trade openness, sector. also positively related cash usage negatively labor force participation rate GDP. Using annual data 1979-2019 period, our empirical results show after an initial surge during Iran-Iraq war (1980-1988), generally decreased, although fluctuations were present. average entire studied period 31.83%