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Money laundering, corruption and socioeconomic development in Iran: an analysis by structural equation modeling

Author

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  • Roberto Dell’Anno

    (University of Salerno)

  • Majid Maddah

    (Semnan University, Central Administration of Semnan University)

Abstract

This paper aims to assess the effects of money laundering (ML) and corruption on socioeconomic development in Iran as a case study for developing countries. We also investigate the complex interactions among socioeconomic development, ML, corruption, private expenditure, and dependence of the Iranian economy on oil production. The paper uses the partial least squares approach to structural equation modeling (PLS-SEM) to estimate an index of Iranian ML over the period 1997–2017. The results show that in the short run, there is a positive overall effect of ML on economic development. This effect is due to the multiplicative effect of the reinvestment of criminal proceeds in the national economy. We estimate that, in the last decade, a plausible estimate of Iranian ML is approximately 10% of official GDP. From a methodological perspective, this research applies a new calibration approach to convert the latent scores calculated by PLS-SEM into actual values of ML.

Suggested Citation

  • Roberto Dell’Anno & Majid Maddah, 2023. "Money laundering, corruption and socioeconomic development in Iran: an analysis by structural equation modeling," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 70(3), pages 395-417, September.
    • Handle: RePEc:spr:inrvec:v:70:y:2023:i:3:d:10.1007_s12232-023-00424-9
    DOI: 10.1007/s12232-023-00424-9
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    More about this item

    Keywords

    Money laundering; Economic development; Corruption; Structural equation modeling; PLS-SEM; Iran;
    All these keywords.

    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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