The shadow economy in Vietnam: Estimates using the MIMIC approach

This study provides an updated province‐specific measurement of the informal sector in Vietnam and identifies critical macroeconomic factors shaping its growth. It uses a Multiple Indicators Multiple Causes (MIMIC) model to estimate the size and determinants of Vietnam's shadow economy from 2015 to 2022. Results reveal that the shadow economy accounted for an average of just over 20 per cent of provincial Gross Regional Domestic Product (GRDP) in 2022, up from 17.7 per cent in 2015. Key drivers in the model include revenue from enterprises and individuals, personal income tax, GDP per capita, foreign direct investment, provincial competitiveness and governance indices. The informal economy significantly influences regional economies, employment, social and unemployment insurance participation, income inequality, and household usage of electricity.