The aim of this study is to design an analytical model for the reduction of the underground economy in Ecuador. With that proposal, econometric techniques were used as a model of structural MIMIC equations for the estimation of the hidden economy in the country. Moreover, a VAR model is developed to determine the simulation of the most significant variables for the reduction of the hidden economy in Ecuador. Additionally this article try to define economic policy measures that impact on those variables. In this sense, the MIMIC model shows that the variables that are statistically significant as causes of the submerged economy in Ecuador are: trade opening, unemployment, inflation, government spending, and the tax burden of a tax indirect as the VAT. Consequently, with this, the estimation of the VAR model presented that the variable that stimulates, in greater percentage, a reduction of the hidden economy is the commercial opening, with a decrease of the hidden economy in 0.8% for each point of increase in this variable. Therefore, the economic policy proposal was addressed to the incorporation of economic liberalization measures that would allow an increase in commercial openness.
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