Diaspora income, financial development and ecological footprint in Africa

ABSTRACT

This study examines the impact of diaspora income on the ecological footprint of 22 African countries. Methodologically, we used the robust type fixed-effect model, fixed effect instrumental variable regression, method of moments quantile regression (MMQR), and the heterogenous granger causality test. There are four main important findings from this empirical study: (1) diaspora income has a negative and statistically significant impact on ecological footprint. (2) financial development plays a crucial role in mitigating the environmental degradation impact of diaspora income, and African countries must achieve an annual estimated threshold of financial development before they could reap the environmental quality impact of diaspora income. (3) the role of financial development in reducing the environmental degradation impact of diaspora income is less for higher polluting countries in Africa. (4) unidirectional causality from diaspora income to ecological footprint. In ensuring a sustainable environment, we recommend that African governments provide a tax credit to the recipient of the diaspora income who invests in environment-friendly technologies.

KEYWORDS:

• Diaspora income
• financial development
• ecological footprint
• Driscoll-Kraay fixed-effect model
• fixed effect instrumental variable regression
• method of moments quantile regression
• heterogenous granger-causality causality test
• Africa

Acknowledgments

We would like to acknowledge the contributions of research participants to this paper.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Availability of data and materials

The datasets used and/or analysed during the current study are available from the corresponding author on reasonable request.

Notes

1. http://www.footprintnetwork.org/our-work/ecological-footprint/

2. https://data.footprintnetwork.org/#

3. This refers to the percentage that ecological footprint exceeds biocapacity

4. C = Consumption; S = Saving; AD = Aggregate Demand; BD = Bank Deposit.

5. The fixed-effect instrumental regression is used to address endogeneity which may arise from reverse causality and omitted variables in the model. lagged FDI was used as instruments in the model.

6. This includes the overall financial development, financial market, and financial institution index.

7. Botswana, Kenya, Nigeria, South Africa, Togo, and Tunisia

8. Botswana and South Africa

9. Botswana, Kenya, Lesotho, South Africa, Togo, Tunisia