The income inequality-CO2 emissions nexus: Transmission mechanisms

Guanghua Wan, Chen Wang, Jinxian Wang and Xun Zhang

Ecological Economics, 2022, vol. 195, issue C

Abstract: Income distribution and environmental degradation represent two of the most important goals in the SDGs (Sustainable Development Goals). However, the linkage between income inequality and carbon emissions remains controversial. Relying on a large set of cross-country panel data (217 countries from 1960 to the latest), this paper contributes to the literature by using the instrumental variable approach to estimate the causal impact of income inequality on carbon emissions and exploring the underlying transmission mechanisms. Our modelling results indicate that there is a trade-off between income inequality and CO2 emissions. And the underlying mechanisms include (1) diminishing marginal propensity to emit (DMPE) coupled with the economic law of diminishing marginal propensity to consume (DMPC); (2) high income inequality induces increases in R&D expenditure, leading to reductions in CO2 emissions; (3) political freedom does not significantly affect the relationship between income inequality and CO2 emissions.

Keywords: Income inequality; CO2 emissions; Political freedom; MPE; MPC (search for similar items in EconPapers)
JEL-codes: D31 F64 Q01 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:195:y:2022:i:c:s0921800922000222

DOI: 10.1016/j.ecolecon.2022.107360

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