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How Does the Shadow Economy Affect Environmental Quality in Sub-Saharan Africa? Evidence from Heterogeneous Panel Estimations

Author

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  • Hilaire Nkengfack

    (University of Dschang)

  • Hervé Kaffo Fotio

    (University of Maroua)

  • Armand Totouom

    (University of Dschang)

Abstract

This paper empirically examines how the size of the shadow economy affects environmental quality in sub-Saharan Africa (SSA). We apply the autoregressive distributed lag (ARDL) methodology to a panel of 22 SSA countries over the 1991–2015 period. Findings show that there is a negative relationship between the size of the shadow economy (in percentage of GDP) and CO2 emission both in the long and short run. Also, the size of shadow economy is found to be inversely related to CO2 emission in the long run for all income groups, but this effect is statistically significant only within the subpanel of lower-middle-income countries. Consistent with the scale effect, our findings suggest that there is no evidence that the shadow economy increases environmental degradation in SSA.

Suggested Citation

  • Hilaire Nkengfack & Hervé Kaffo Fotio & Armand Totouom, 2021. "How Does the Shadow Economy Affect Environmental Quality in Sub-Saharan Africa? Evidence from Heterogeneous Panel Estimations," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(4), pages 1635-1651, December.
    • Handle: RePEc:spr:jknowl:v:12:y:2021:i:4:d:10.1007_s13132-020-00685-7
    DOI: 10.1007/s13132-020-00685-7
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    Cited by:

    1. Fotio, Herve Kaffo & Nchofoung, Tii N. & Asongu, Simplice A., 2022. "Financing renewable energy generation in SSA: Does financial integration matter?," Renewable Energy, Elsevier, vol. 201(P2), pages 47-59.
    2. Nchofoung, Tii N. & Asongu, Simplice A., 2022. "Effects of infrastructures on environmental quality contingent on trade openness and governance dynamics in Africa," Renewable Energy, Elsevier, vol. 189(C), pages 152-163.
    3. Awadh Ahmed Mohammed Gamal & Joseph David & Mohd Asri Mohd Noor & Mohd Yahya Mohd Hussin & K. Kuperan Viswanathan, 2024. "Asymmetric Effect of Shadow Economy on Environmental Pollution in Egypt: Evidence from Bootstrap NARDL Technique," International Journal of Energy Economics and Policy, Econjournals, vol. 14(3), pages 206-215, May.
    4. Onwuka , Ifeanyi & Ayeni, Emmanuel, 2023. "Financial Development and Shadow Economy in Africa: Evidence from Panel Quantile Regression," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 48(2), pages 123-141, June.
    5. Sheng Xu & Michael Asiedu & Nana Adwoa Anokye Effah, 2023. "Inclusive Finance, Gender Inequality, and Sustainable Economic Growth in Africa," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(4), pages 4866-4902, December.

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    Keywords

    Shadow economy; CO2 emissions; Sub-Saharan Africa;
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