Connotation of Ecological Sustainability and the Informal Economy: Evidence from South Asia

Abstract

The increasing population, growing economies, high risk of ecological degradation, climate change, and large unregistered economies are key features of South Asian economies. The degree to which these ecological effects occur varies widely and is highly dependent on the caliber of the institutions that oversee the economies. The study aims to examine the interaction of the informal economy and ecological sustainability in South Asian countries. The study applied panel-data regression analysis from 2001 to 2024, using the pooled mean-group technique for empirical testing. The findings show that the informal economy has a positive and substantial relationship with ecological sustainability. Nevertheless, the interaction between the informal economy and other macroeconomic indicators has a mixed effect on the relationship between the informal economy and ecological sustainability. The informal sector has a considerable impact on ecological degradation, which overshadows the effect of environmental policies, thereby accentuating the weakness of the established framework in major South Asian countries. South Asian countries require structural changes, primarily to introduce an incentive policy for eco-friendly production and working environments and to shift from burning fossil fuels to renewable energy sources.

Keywords:

Informal Economy. Ecological Sustainability, Air Pollution (CO₂ Emissions), Macroeconomic Indicators, PMG Model, South Asian Countries.