The impact of informal economy on environmental pollution: Example of Turkey

This study investigates whether the informal economy in Turkey increases environmental pollution. the empirical analysis covering the period 1991-2019 was carried out using time series methods. In this context, first of all, the stability test was performed with the ADF, PP and ZA test, and then the long-term relationship between the series was examined with the ARDL boundary Deciency test. Since the existence of a long-term relationship has been proven, short- and long-term coefficient estimates have been switched to. The long-term coefficient estimation results showed that the informal economy has significant (positive) effects on environmental pollution. It has also been found that the error correction mechanism works with the error correction model. In short, it has been concluded that the informal economy in Turkey increases environmental pollution. Based on these results, it is possible to say that the policies that should be implemented in order to reduce the size of the informal economy should also include measures to reduce environmental pollution. Policies aimed at reducing the size of the informal economy; budget deficits, tax revenues, employment, etc. in addition to reducing its negative effects on macroeconomic indicators, it will also reduce its destructive effect on environmental pollution.