Are environment, informal sector and poverty interrelated?

Abstract

In developing countries, the informal sector plays a diverse role, from eradicating poverty to polluting the environment. Perhaps, due to inadequate awareness and scanty literature, the aspect remained ignored. This study was an attempt to determine the simultaneous relationship between environment, informal sector, and poverty. This study was based on panel data study of three countries, Pakistan, Bangladesh, and India. ARDL approach was used to measure the size of the informal sector economy of Pakistan, India, and Bangladesh. The generalized momentum (GMM) method was applied to determine the environment's simultaneous effects, on poverty, and the informal sector economy. The outcomes unveiled that informal sector employment and poverty expedited the carbon dioxide emission in three countries such as India, Pakistan and Sri Lanka. Secondly, poverty and CO2 emissions had a positive association with the informal sector whereas thirdly, there was a negative impact of the informal sector economy and CO2 emissions on the poverty. This study urges to channelize the informal sector because it can contribute towards poverty reduction in a better way once its channelized and provision of adequate awareness among the people regarding judicious use of natural resources. For instance, climate smart agriculture, sustainable farming and Good Agricultural Practices have been implemented to curtail the CO₂ emissions from agriculture sector. The needs are to provoke other sectors as well followed by the initiation of legal restrictions on CO₂ emissions