Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/245328 
Year of Publication: 
2020
Citation: 
[Journal:] Cogent Economics & Finance [ISSN:] 2332-2039 [Volume:] 8 [Issue:] 1 [Publisher:] Taylor & Francis [Place:] Abingdon [Year:] 2020 [Pages:] 1-18
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
In this paper, the size of the informal economy of Pakistan is determined by including the legal and political-institutional variables as determinants. By using the MIMIC model average estimate for the informal economy of Pakistan is 37.75 percent from 1995 to 2017. The study tries to explore the institutional implications of the informal economy for policymakers to reduce and control the informal economy in the developing country. Empirical results show that the most significant legal variable is Law and Order and the most important political variable is Religion in Politics for measuring the informal economy. Departing from existing studies, institutional determinants are explored in detail because these different institutional determinants may affect the informal economy differently in developed, developing, and underdeveloped countries. The policy formation process can be more effective in developing countries like Pakistan with consideration of the most relevant institutional factors in estimation.
Subjects: 
informal economy
underground economy
formal and informal sectors
shadow economy
institutional arrangements
institutional quality
MIMIC model
Pakistan
JEL: 
E26
O17
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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