The Impact of the Hidden Economy on Government Expenditure (Econometrics Analysis Study in Iraq)

Abstract

This research aims to find the impact of the hidden economy on the size of government Expenditure in Iraq for the period (2000 - 2013) in the short and long term, it has been using the standard methods of testing the unit root test of common integration model and error correction to reach the goal of the research. The research found that the search in the short term for long-term results did not differ much, In light of the results of estimating the joint integration equation (long-term relationship) and the results of estimation error correction model (short-term relationship) show that the variable size of the hidden economy negative and significant impact on Expenditure of government in term through lower tax revenues and thus lower government Expenditure and an inability to finance government development projects. It emerged from the search results that the negative impact of the economy hidden on government Expenditure in Iraq minimal because the Iraqi economy system depends mainly on the tax system, but mainly depends on the revenues of sales of oil, which constitutes a major source of national income and thus mainly of government Expenditure.