The Effect of Informal Economic activities on Air Pollution Index (Environmental Kuznets Curve Estimation)

Decomposition of economic activities to formal and informal, the formal activities are those which monitored by official data and on the other hand the informal economic activities are those that arent reflected through official statistics. They arent transparent as much to be traced by authorities in spite their considerable volume. One of the main reasons that economic agents prefer to transform their business to informal part of economy is to avoid regulations such as: tax, duties, standards and etc. One of the main features of these regulations is environmental consideration (e.g. environmental tax and standards) which is sensibly important for industries. Especially for pollutant ones which are usually behave unofficially and their activities have much more degrading effects on environment. We are to study the effect of informal economic activities on environmental quality a cross country approach. We used a basic Kuznets model through panel data technique for 140 countries. The result implies a considerable impact of informal activities on environment not only in high income countries but in low and middle ones.