Impact of Underground Economy on CO2 Emission in Iran 1987-2012

The underground economy is a global phenomenon in all the countries in the world and the researchers, and the governments have attracted to this issue in the past four decades. The conventional economic literature and official statistics do not indicate the situation of the shadow economy’s activities. However, the considerable parts of economic activities are placed in the informal, shadow, hidden, or underground economy. This paper examines the effects of the underground economy’s activities on the environment and its performance. This study analyzes these relationships with using ARDL econometric model for the period of 1978-2001. So in this study, we address to the relationship between the underground economy and environmental pollution (air pollution). The results indicate that air pollution is positively correlated with the underground economy and per capita national income. Moreover, the air pollution by economic openness negatively