The effects of environmental taxes on environmental pollution and unemployment: A panel co-integration analysis on the validity of double dividend hypothesis for selected African countries

Abstract

In this study, the validity of the double dividend hypothesis for several African countries (Cameroon, Ivory Coast, Mali, South Africa, and Uganda) is investigated for the period of 1994-2017. The double dividend hypothesis claims that, in addition to reducing environmental pollution, environmental taxes can also increase employment. In this study, the validity of this hypothesis is examined with panel co-integration and long-run estimators. According to the findings obtained, environmental taxes increased environmental degradation and unemployment in Cameroon, environmental degradation in the Ivory coast, environmental degradation and employment in Mali, environmental restoration in South Africa and employment in Uganda. When the individual results obtained from the study are evaluated in general, it can be said that the double dividend hypothesis is not valid for African countries. The study proposes that taxation should be used as a financial incentive rather than a command-and-control policy to combat unemployment and environmental degradation.