Illegal Trade in the Iranian Economy: Evidence from a Structural Model

40 Pages Posted: 25 Sep 2008

See all articles by Mohammad Reza Farzanegan

Mohammad Reza Farzanegan

University of Marburg - Center for Near and Middle Eastern Studies (CNMS)

Date Written: September 2008

Abstract

This study investigates the main causes and consequences of import and export smuggling and estimates the relative index of smuggling in Iran from 1970 to 2002. The Multiple Indicators - Multiple Causes (MIMIC) econometric modelling is used for a comprehensive analysis of the latent variable of smuggling. The main results of this paper indicate that the rate of fine for smuggling and the general level of education reduce smuggling, while the tariff burden increases the incentives for illegal trade. More trade openness accompanies more illegal trade for the case of Iran. On average, the relative size of smuggling is about 13% of the total trade in Iran. The absolute amount of smuggling per year is about $3 billion.

Keywords: smuggling, structural equation model, Iran, illegal trade

JEL Classification: O17, C39, H26

Suggested Citation

Farzanegan, Mohammad Reza, Illegal Trade in the Iranian Economy: Evidence from a Structural Model (September 2008). CESifo Working Paper Series No. 2397, Available at SSRN: https://ssrn.com/abstract=1273505

Mohammad Reza Farzanegan (Contact Author)

University of Marburg - Center for Near and Middle Eastern Studies (CNMS) ( email )

Deutschhausstraße 12
Marburg, 35037
Germany

HOME PAGE: http://www.uni-marburg.de/cnms/wirtschaft

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