The Effect of Economic Sanctions on Iran's Formal and Informal Economy

Economic infrastructure plays an important role in the economic growth of developing countries. An increase in the informal sector of the economy will lead to lower tax bases, less production of basic public infrastructure and public services, and ultimately lower economic growth. As a developing country in need of economic growth, Iran is currently embroiled in sanctions in various dimensions, including economic. Therefore, in this study, the effect of economic sanctions on the informal economy in the provinces of Iran is examined by the data panel method during the period 2005-2019. Findings show that the effect of economic sanctions, unemployment rate and value added of the industrial sector on the informal economy in the provinces of Iran is negative and significant and the effect of inflation, value added of the agricultural sector and taxes on it has been positive and significant. Accordingly, formulate effective rules and regulatory policies in the field of taxation to reduce the adverse effects on the state of the country's economy, apply appropriate monetary policies to control inflation, reduce legal trade restrictions to prevent the development of smuggling, It is recommended to reduce the rules and regulations of government institutions to enter the business environment in the formal economy and also to help create jobs in the formal sector of the economy in order not to be affected by sanctions in order to exploit policy makers.