The impact of informality and institutional quality on environmental footprint: The case of emerging economies in a comparative approach

Abstract

The endeavor to implement the 2030 Agenda of national and international stakeholders became increasingly impetuous, considering the wide range of uncertainties and risks. The new humans-centered development model built on the prominence of environmental and social values seeks to reinforce communities’ resilience and mitigate environmental risks, leaving no one behind. For this to happen, solid and effective institutions, the right environmental policies, and a safe statutory labor framework are the sine qua non. In this study, we evaluated the effects of informality, institutional quality, and renewable energy consumption on ecological footprint of two groups of emerging countries from Europe and Asia from 2002 to 2018. Our results by PMG-ARDL approach highlight dissimilarities between the two groups, showing greater heterogeneity. In this sense, informality is found to have positive and significant effects on ecological footprint in the long run in emerging European countries. In contrast, the effect is negative for emerging Asian countries. In the short run, the effects are less critical in the studied countries between the two groups. Institutional quality variables impacted environmental quality differently. In this sense, it is detrimental for policymakers to consider concerted measures to decrease institutional vulnerabilities and reduce the level of the informal economy. The outcome of this study concurs with a complete awareness of the importance of informality and institutional quality to mitigate social and environmental risks conjunctively.