Informality and the climate change-poverty nexus: empirical evidence from African countries

ABSTRACT

The present paper introduces informality into the climate change-poverty nexus using 40 Sub-Saharan African countries selected from high-, middle and low-income countries between 1990 and 2019. The empirical results show that informality is an important variable that can mitigate the impact of climate change on poverty. The moderation of the poverty-climate change nexus is nonlinear in income. Informality reduces the negative effect of climate change on poverty in middle income countries while exacerbating its effect in low-income countries. Possible channels of influence are identified. Policy makers need to rethink the role of informality in an environment where informality is mainly seen as a nuisance, to see it as an ally that can achieve key results for the fight against environmental degradation and extreme poverty.

KEYWORDS:

• Informality
• Africa
• CO₂
• poverty
• climate change

Disclosure statement

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

Notes

1 Incorporation of dynamic effects, alluded to here but not accounted for in the analysis suggest that the relationship between poverty and informality is somewhat complex and has been shown to be negative in some cases. See Bolarinwa and Simatele (2022) and Pham (2022).