Energy Consumption-Informal Economic Growth Analysis: What Policy Options Do We Have?

This paper studies chiefly the causality relation between economic growth and energy consumption in the presence of the informal sector. The empirical results for Tunisia during the period 1980–2009 suggest that the causality directions are mixed between the different variables. The long-run dynamics of the interested variables are tested, indicating that there exists Granger causality running from energy consumption to formal GDP and total GDP. On the other hand, the most important result supports in the short-run the neutrality hypothesis between formal economic growth and energy consumption. Yet, this effect is not permanent. Virtually, it disappears in the presence of the informal sector to be a conservation hypothesis. Consequently, the government must make use of more efficient instruments not only to quantify the size of the informal sector but also to diminish the quantity of polluting emissions. Hence, an important political implication ensuing from this analysis is that the informal economic growth can be considered as a key factor which favours environmental degradation. Copyright Springer Science+Business Media New York 2016