Business climate and environmental degradation: evidence from Africa

The association between economic growth and environmental degradation is well documented. However, the link between business climate and ecological footprint remains an open question. This paper therefore explores the extent of the influence of business climate on environmental degradation in Africa. The impacts of business climate are estimated in a panel of 35 African countries observed over the period 2006–2018, using ecological footprint to account for environmental degradation. Panel spatial consistent correlation estimation technique, system generalized method of moments and method of moment panel quantile regression are used to estimate the model. The results show that business climate contributes to environmental degradation in developing economies. A 1% increase in business climate distorts environmental quality by 17.8%. The study reveals that although many development experts often encourage the ease of doing business policy, it does not come without its own potential damaging repercussion for the ecological environment. The paper contributes to the empirics by suggesting a new model that integrates the quantitative impacts of business climate on ecological footprint. Policymakers need to understudy how business firms can incorporate a better responsiveness toward the ecosystem. An improvement in business activities monitoring can help to mitigate the ecological footprint issues in developing countries.