Environmental quality and its nexus with informal economy, corruption control, energy use, and socioeconomic aspects: the perspective of emerging economies

Abstract

This paper explores the impacts of informal economic activities and institutional capacity, particularly, corruption control on the environmental quality degradation of emerging economies under the prevailing socio-economic conditions and energy use patterns of the countries. The study utilizes key environmental degradation indicators: Carbon dioxide (CO2) emissions, ecological footprints (EFs), and Nitrous Oxide (NO) emissions, and a panel dataset of 15 emerging countries for the period 2002–2019 to undertake an empirical investigation. The pooled mean group (PMG)-ARDL estimator, Fully Modified OLS (FMOLS), Dynamic OLS (DOLS) and Augmented Mean Group (AMG) methods have been applied as empirical investigation techniques. The empirical findings reveal that in the long-run informal economic activities positively affect the environmental quality with fewer recorded emissions of CO2 and EFs while these activities affect negatively to NO emissions. This study has also found that corruption control improves environmental quality by reducing EFs and NO emissions but works to the opposite by increasing recorded CO2 emissions. An increase in economic growth and renewable energy consumption improves environmental quality in emerging countries, while consumption of non-renewable energy degrades the environmental quality. The robust empirical findings advocate policy initiatives for intense monitoring of informal activities and implementation of indirect tax policy to regulate informal activities and the pollution they cause. Careful measures of corruption control and initiatives to bring the informal economic activities into a formal framework are suggested to reduce CO2 and NO emissions. An increase in economic growth with more focus on renewables and phasing out non-renewables can ensure green growth in emerging countries.