Urbanization, informal economy, and ecological footprint quality in South Asia

In recent years, South Asian economies have observed rapid urbanization along with expanding informal economy that poses a serious threat to environmental quality. This study examines the impact of urbanization and informal economy on the ecological footprint of selected South Asian countries. Results indicate that urbanization and informal economy increase the environmental degradation in South Asia and the estimates are statistically significant in the long run. In the short run, urbanization positively affects the ecological footprint in Bangladesh, Pakistan, Sri Lanka, and Nepal except India, while the informal economy also enhances environmental degradation for all the selected countries except Bangladesh. Most surprisingly, the interaction term of urbanization and informal economy has a negative impact on ecological footprint, and the coefficient is statistically significant as well. To combat the environmental issues in South Asia, detailed policy recommendations have been suggested at the end.