The impact of the underground economy on the trade value of green goods : Insights from a global data sample

Abstract

Previous studies have emphaized the role of trade in green goods in the strategy of reducing environmental pollution, aiming at the goal of sustainable development. However, the existence of the shadow economy brings risks that affect the development of green commodity trade activities. This paper is one of the few empirical study to assess the impact of the size of the shadow economy on the trade value of green goods. Using different panel regression methods on a global data sample of 81 developing countries and 32 developed countries over the period 2005- 2022, the model estimation results from 12 models show that the size of the shadow economy has a negative impact on the trade value of green goods. The main findings of the paper suggest an important channel to promote green goods trade as well as effectively manage the development of the shadow economy. Designed control measures need to be strengthened and implemented on a large scale to limit the size of the shadow economy in each country in the direction of sustainable development in countries through promoting trade in green goods.