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Carbon emissions, income inequality and economic development

  • Abebe HailemariamEmail author
  • Ratbek Dzhumashev
  • Muhammad Shahbaz
Article
  • 9 Downloads

Abstract

This paper investigates whether changes in income inequality affect carbon dioxide (\(\mathrm{CO}_2\)) emissions in OECD countries. We examine the relationship between economic growth and \(\mathrm{CO}_2\) emissions by considering the role of income inequality in carbon emissions function. To do so, we use a new source of data on top income inequality measured by the share of pretax income earned by the richest 10% of the population in OECD countries. We also use Gini coefficients, as the two measures capture different features of income distribution. Using recently innovated panel data estimation techniques, we find that an increase in top income inequality is positively associated with \(\mathrm{CO}_2\) emissions. Further, our findings reveal a nonlinear relationship between economic growth and \(\mathrm{CO}_2\) emissions, consistent with environmental Kuznets curve. We find that an increase in the Gini index of inequality is associated with a decrease in carbon emissions, consistent with the marginal propensity to emit approach. Our results are robust to various alternative specifications. Importantly, from a policy perspective, our findings suggest that policies designed to reduce top income inequality can reduce carbon emissions and improve environmental quality.

Keywords

Carbon dioxide emissions Income inequality Economic development Environmental Kuznets curve Panel data 

JEL Codes

O4 Q0 Q1 Q3 

Notes

Acknowledgements

The authors would like to thank the Coordinating Editor, Professor Robert M. Kunst and the three anonymous reviewers for their excellent and constructive comments on the previous version of this paper.

Compliance with ethical standards

Conflicts of interest

All authors declare that they have no conflict of interest.

Ethical approval

This article does not contain any studies with human participants or animals performed by any of the authors.

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of EconomicsMonash UniversityMelbourneAustralia
  2. 2.Montpellier Business SchoolMontpellierFrance
  3. 3.COMSATS University IslamabadLahore CampusPakistan

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