Foreign aid and entrepreneurship in Africa: the role of remittances and institutional quality

Sharimakin³

2021

WJSTSD

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PurposeThis study investigates the effect of shadow economy on environmental pollution and the role of institutional quality in moderating the impact in African countries between 1991 and 2015.Design/methodology/approachThe study employs three pollutant variables namely: carbon dioxide emissions per capita, methane emission and nitrous oxide emission as robustness check. Also, battery of methodologies; ordinary least squares, fixed effects and system generalised method of moments are used to drive out the conclusions of this study.FindingsThe findings reveal that shadow economy and institutional quality contribute significantly to environmental pollution in Africa. Further, the interactive effect of shadow economy and institutional quality worsens environmental quality in the region. This reveals that weak institutional quality recorded in the region increases the level of shadow economy, thereby intensifying environmental pollution.Practical implicationsThe study concludes that weak institutional framework in the region reinforces shadow economy and environmental pollution. Hence, findings from this study can help policymakers in the region to better understand the role of institutional quality in reducing shadow economy and environmental pollution.Originality/valueThis study enriches one’s understanding on the role of institutional quality in the relationship between environmental quality and shadow economy in African context. It investigates the direct and indirect impact of institutions and shadow economy on environmental quality. The study also uses three different robust variables to measure environmental pollution (carbon dioxide (CO2) emissions per capita, methane emission and nitrous oxide emission) for sensitivity analysis.

Section: Methodsmentioning

confidence: 99%

Shadow economy, institutions and environmental pollution: insights from Africa

Sharimakin³

2021

WJSTSD

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“…Specifically, the PCSE technique was implemented because a conventional panel estimator, such as the fixed effect, GLS, and/or random effect, may be unreliable in the presence of cross-sectional dependence. Unlike feasible generalized least squares (FGLS), the PCSE estimator provides accurate standard errors where there is cross-sectional dependence, especially when the time period is at least less than the number of cross-sectional units (N; Beck & Katz, 1995;Ajide & Osinubi, 2020). In this study, our T = 12, and our N = 21, which provides a justification for using PCSE for the analysis in the first instance.…”

Section: A Preliminary Testmentioning

confidence: 98%

“…Entrepreneurship is often associated with many positive changes in developing economies, such as job creation, innovation, and welfare impacts (Ajide & Osinubi, 2020;Acs & Virgill, 2009;Desai, 2009). Economic globalization enhances entrepreneurial development because it opens developing countries up to economic restructuring, thus accelerating the accumulation of capital and qualified human resources, and strengthening the sociopolitical substructure.…”

Section: A Theoretical Frameworkmentioning

confidence: 99%

Economic Globalization, Entrepreneurship, and Inclusive Growth in Africa

Osinubi

Journal of Economic Integration

2021

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An increasing number of studies are examining the relationship between entrepreneurship and growth. This relationship is controversial, especially for developing countries. Recent improvements in economic growth have led to a focus on growth inclusiveness, which spreads economic opportunities throughout a society. However, studies that focus on the role of entrepreneurship in inclusive growth remain scarce. To fill that gap, this study investigates the dynamic relationship between economic globalization, entrepreneurship, and inclusive growth in 21 African countries using panel econometrics to examine data covering 2006 to 2018. The results reveal that the impact of economic globalization and entrepreneurship on inclusive growth is positive and significant. We find that economic globalization enhances entrepreneurial development, and causality tests show that economic globalization drives inclusive growth. We also find a unidirectional causality from entrepreneurship to inclusive growth. Finally, we observe no direction of causality between economic globalization and entrepreneurship but observe a bidirectional causality between governance and entrepreneurship. We discuss the implications of these results.

“…In order to determine the threshold of institutional quality in the relationship between shadow economy and environmental pollution, this study adopts the approach used in extant studies (Law et al , 2018; Olaniyi and Oladeji, 2020; Ehigiamusoe et al , 2020; Ajide and Osinubi, 2020). The normalized long-run model in equation (5) is differentiated with respect to shadow economy and set equal to zero.From equation (8), the threshold of institutional quality in Nigeria is 5.69 on an ordinary scale of 0–10.…”

Section: Empirical Results and Discussionmentioning

confidence: 99%

The moderating role of institutional quality in shadow economy–pollution nexus in Nigeria

2021

MEQ

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PurposeThis study examines the moderating role institutional quality plays in shadow economy–environmental pollution nexus in Nigeria between 1984 and 2018. Further, the study also determines the threshold level of institutional quality that lessens shadow economy and abates environmental pollution.Design/methodology/approachShadow economy is measured as a percentage of gross domestic product (GDP) using the currency demand approach while environmental pollution is proxy by carbon dioxide (CO2) per capita. Autoregressive distributed lag (ARDL) is used as the estimation technique.FindingsResults from the study show that shadow economy has a positive and significant effect on environmental pollution both in the short and long run, while institutional quality has a negative effect on environmental pollution. This reveals that shadow economy worsens environmental quality while institutional quality abates environmental pollution. The interactive term of shadow economy with institutional quality has a negative but insignificant effect on environmental pollution in the long run. It implies that institutional quality is weak to bring about significant reduction in shadow economy and environmental pollution. Further, the threshold level of institutional quality required to lessen the effect of shadow economy and abate environmental pollution is found to be 5.69 on an ordinal scale of 0–10.Practical implicationsInstitutional quality in Nigeria is weak and needs to be strengthened up to the threshold level in order to effectively moderate the impact of shadow economy on environmental pollution.Originality/valueThe study addresses the perceived gap in the empirical literature on the emerging role of strong institution in abating environmental pollution in Nigeria. It also develops a threshold level of institutional quality capable of mediating the negative impact of shadow economy on environmental pollution. This empirical contribution is largely missing in the context of Nigeria.