Iranian Journal of Economic Research

The Impact of Globalization on the Iranian Underground Economy Over Four Decades: MIMIC and ARDL Approaches

Articles in Press

Document Type : Research Paper

Authors

Ahmadreza Ahmadi 1
Ghahreman Abdoli 2
Fatemeh Azhari 3

1 Ph.D. Student in Econometrics, Faculty of Economics, Allameh Tabatabai University, Tehran, Iran.

2 Department of Economics , Faculty of Economic , University of Tehran

3 M.Sc in Theoretical Economics, Faculty of Economic and .Administrative Sciences, Mazandaran University, Babolsar, Iran

https://doi.org/10.22054/ijer.2025.82326.1314
Abstract
The present study examines the impact of globalization on Iran’s underground economy over the period 1979–2020. In this regard, the size of the underground economy was estimated using the MIMIC method. Subsequently, the effects of the three main dimensions of globalization—economic, social, and political—as well as the dual components of each dimension (de facto and de jure), were analyzed using the autoregressive distributed lag (ARDL) approach. The findings from the long-run estimations indicate that the economic and social dimensions of globalization have a negative effect on the underground economy, whereas the political dimension exerts a positive effect. Further analysis of the components of each globalization dimension reveals that both the de facto and de jure components of social globalization negatively influence the underground economy. Although the de jure component of economic globalization also has a negative impact, its de facto component does not have a significant effect. Regarding the political dimension, de facto component has a significant positive effect on the underground economy, while the de jure component does not show a meaningful impact. Additionally, the results demonstrate that, in all four estimated models, unemployment has a positive effect and financial deepening has a negative effect on the underground economy. These findings offer useful guidance for policymakers aiming to reduce the size of the underground economy and enhance economic transparency in the country.

Keywords

Underground Economy
Globalization
Triple Dimensions and Dual Components
MIMIC
Iran
Subjects
Iranian Journal of Economic Research

Articles in Press, Accepted Manuscript
Available Online from 13 July 2025

  • Receive Date 07 October 2024
  • Revise Date 12 June 2025
  • Accept Date 02 June 2025
  • First Publish Date 13 July 2025

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