The impact of the shadow economy on economic growth and CO2 emissions: evidence from ECOWAS countries.

Abstract

The Economic Community of West African States (ECOWAS) is one of the most dynamic African sub-regional organizations in several areas, such as economic integration and environmental conservation. On the other hand, it is also one of the sub-regions with the largest size of the shadow economy in the world. This article empirically explores the impact of the shadow economy on economic growth and CO2 emissions in ECOWAS countries. Using system generalized method of moment (SGMM) and common correlated effects mean group (CCEMG) estimators on annualdata from 14 ECOWAS countries over the period 1991-2016, the results suggest that the shadow economy decreases economic growth and CO2 emissions. However, the impact of the shadow economy on economic growth is more significant and higher than that on CO2 emissions. The results also indicate that industrialization and urbanization tend to increase economic growth and CO2 emissions in these countries.