Ilegal Trade In The Iranian Economy: Evidence From a Structural Model

Smuggling is the clandestine import of goods (Deflem and Henry-Turner, 2001) or the evasion of excise taxes by circumvention of border controls (Merriman, 2003). A large body of literature has examined theoretical aspects of the effects of smuggling on social welfare and economy (e.g., see [Bhagwati and Hansen, 1973], [Pitt, 1981], [Martin and Panagariya, 1984] and [Norton, 1988]; and Thursby et al., 1991). This paper provides an empirical contribution by applying structural equation modeling techniques and examination of foreign trade statistics to the case of Iran.