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

Hilaire Nkengfack (), Hervé Kaffo Fotio () and Armand Totouom ()
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Hilaire Nkengfack: University of Dschang
Hervé Kaffo Fotio: University of Maroua
Armand Totouom: University of Dschang

Journal of the Knowledge Economy, 2021, vol. 12, issue 4, No 5, 1635-1651

Abstract: 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.

Keywords: Shadow economy; CO2 emissions; Sub-Saharan Africa; O17; O13; Q53 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s13132-020-00685-7

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