Economic behavior and institutions an attempt to estimate the Algerian Non Observed economy

Abstract

Today’s development challenge lies in the link between institutions and growth rates, which conduct to a crucial problem of developing countries, the so-called the underground economy (UE). In this research we will emphasize the impact of institutions on the rising size of the UE. To do so, we will measure the size of the Algerian UE using the modeling approach (the MIMIC model), in addition to the monetary approach over the period 1990 to 2009. We find that the size of the underground economy is about 24 % in average; and main causes of the development of the hidden activities are: inflation rate, government expenditures, unemployment and minimum wages.