Urbanization, informal economy, economic growth and CO2 emissions in African countries: a panel vector autoregression (PVAR) model approach

Although the relationship between urbanization, the informal economy, economic growth, and environmental degradation (CO2 emissions) have received considerable attention from multidisciplinary researchers, little work has been undertaken on how differences in the stages of development of different sub-regions of the countries studied may affect these relationships. This paper empirically explores the relationship between urbanization, the informal sector, economic growth, and CO2 emissions. A balanced dataset for a panel of 45 African countries subdivided into sub-regions was analyzed over the period 1991–2019. To achieve the objectives of the study, we used a vector autoregression panel (PVAR). The results demonstrated a bidirectional relationship between CO2 emissions and urbanization, CO2 emissions and economic growth, CO2 emissions and the informal sector, the informal sector and economic growth, and economic growth and urbanization. Furthermore, the empirical results of this study not only contribute in advancing the literature that addresses the relationship between human activity and the environment, but also warrant new insights into the importance of the stage of development in a sub-region in Africa for public policy decisions related to CO2 emissions reduction.