Informal Economy in Iran and The Effect of Inflation on It

Document Type : پژوهشی

Authors

• Mostafa Salimifar
• Mohammad Keivanfar

https://doi.org/10.22067/pm.v17i33.27301

Abstract

In present paper, first the concept of informal economy and its place in the economic literature has been described. Then the causes and factors involved in providing the informal sector was examined and the volume of informal economy was estimated. Second, the effect of inflation on informal economy was surveyed. To estimate the volume of informal sector, Residual discrepancy method was used and the volume of informal economy in urban areas in Iran economy from 1982/83 to 2008/09 was calculated. The results show the increasing trend of informal sector volume, during the imposed Iraq-Iran war. In addition, after the imposed war some fluctuation in the hidden economy has been detected. In the final part, after studying existing stationary of the used variables, the effect of inflation rate (in special groups) on the informal sector was examined by using OLS method. The results show that urban informal sector increase, if only inflation rate in the goods group grow up.

Keywords

• Formal Economy
• Informal Economy
• Volume of the Informal Economy
• Inflation
• Residual Discrepancy Method
• OLS method