Examining the Effective Social and Economic Factors on Underground Economy

Abstract

The expansion of underground economic activities is a reality in today's world and it plays a vital role in the economy and the lives of people in many countries. The aim of this study is to examine the effect of 8 variables (income level, education level of the individual, spouse's education, feeling of relative deprivation, unemployment, risk and severity of punishment, family background and the price gap between the formal and informal market) on the tendency of people to act in underground economy activities with a social and economic approach. Sistan and Baluchistan (eastern frontier province of Iran) is the case of this study with the sample size of 300 people. Logit model has been used to determine the people of two groups, which consist of people who act in underground activities and non engaged people. The results show that the unemployment and the feelings of relative deprivation in terms of social have a positive and significant effect on tendency of people to underground activities. But there are negative significant relationships between the level of individual spouse's education, the level of individual education, family background, income level and feeling of relative deprivation economically and the tendency of people to carry out activities in underground economy. DOI: 10.5901/mjss.2015.v6n3p525