Diaspora income, financial development and ecological footprint in Africa

Abstract

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.