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The income inequality and carbon emissions trade-off revisited

Jorge Rojas-Vallejos and Amy Lastuka

Energy Policy, 2020, vol. 139, issue C

Abstract: This paper investigates the marginal effect of income inequality on carbon emissions per-capita. We use a panel consisting of 68 countries over a 50-year period from 1961 to 2010. We report estimates that support the hypothesis that there is a trade-off between carbon emissions per-capita and income inequality. This trade-off is not homogeneous across countries and depends upon the level of development measured by income per-capita. Using panel smooth transition regression, we find that this relationship is negative for countries with low to moderate income per-capita but becomes slightly positive after passing a threshold located around fifteen thousand 2011 US dollars. Moreover, the inequality elasticity of emissions per-capita is comparable in magnitude to its income elasticity. Therefore, both inequality and income levels are crucial to define policies to reduce carbon emissions. This implies a challenge to policymakers who pursue to reduce both income inequality and carbon emissions.

Keywords: Quantitative methods; Carbon emissions; Income inequality (search for similar items in EconPapers)
JEL-codes: C23 D31 Q01 Q53 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.enpol.2020.111302

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