Estimation of Fiscal Illusion Index in Iranian Provinces: Approach of Multiple Indicators and Multiple Causes (MIMIC) Model

Document Type : Research Article


1 Professor, Department of Economics, Faculity of Economics and Management, Tabriz University, Tabriz, Iran

2 PhD student in economics, resource and environment orientation (second orientation of the general sector), Department of Economics, Faculity of Economics and Management, Tabriz University, Tabriz, Iran.

3 Associate Professor, Department of Economics, Faculty of Economics and Management, Tabriz University, Tabriz, Iran.

4 Professor, Department of Economics, Faculty of Economics and Management, Tabriz University, Tabriz, Iran.


Purpose of the present study is to estimate the fiscal illusion index, using Multiple Indicators Multiple Causes (MIMIC) model, using longitudinal data during the period of 2001 to 2021, for 31 provinces of Iran country. The results indicate that the most important causal variables of fiscal illusion index are educational costs and tax burden (with a negative effect) and economic participation rate (with a positive effect), and the most important indicators of fiscal illusion were Herfindahl index (with a negative coefficient), budget deficit, inflation rate, indirect tax ratio, real effective exchange rate and Oil revenue (with a positive coefficient) (and all are statistically significant). Also, the results showed that the average value of the estimated fiscal illusion index, among of the provinces, the lowest average value belongs to Khorasan Shomali and the highest value belongs to Khozestan province. Furthermore, the lowest average value of fiscal illusion index in the country level belongs to 2001 & 2002 and the highest is in 2021.


Main Subjects

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