Inequality and Climate Change: Two Problems, One Solution?

Francesco Nicolli, Marianna Gilli and Francesco Vona
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Marianna Gilli: Department of Economics and Management, University of Ferrara

No 2022.32, Working Papers from Fondazione Eni Enrico Mattei

Abstract: This paper re-examines the relationship between per capita income, inequality, and per capita emissions while accounting for nonhomotheticity in green preferences and nonlinearities in the impact of economic growth on GHG emissions. Theoretically, our research is motivated by the fact that if environmental quality is a need with low priority on the hierarchical scale, the effect of inequality on emissions should vary depending on the level of income per capita. Specifically, for a given level of income per capita, a richer median voter will be more likely to approve of more stringent environmental policies, and thus, lower inequality is beneficial for the environment. With nonhomothetic preferences, the beneficial environmental effect of reducing inequality emerges only for countries that are sufficiently rich. We test this hypothesis by augmenting a standard EKC equation with the interaction between income per capita and the Gini coefficient. Our results for CO2, SO2 and N2O emissions corroborate our main hypothesis: reducing inequality is beneficial for the environment only for rich countries.

Keywords: Inequality; Climate Change; GHG Emissions; Environmental Kuznets Curve; Sustainable Development Goals; Political Economy (search for similar items in EconPapers)
JEL-codes: O15 Q53 Q56 (search for similar items in EconPapers)
Date: 2022-11
New Economics Papers: this item is included in nep-agr, nep-ene, nep-env and nep-res
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Related works:
Working Paper: Inequality and Climate Change: Two Problems, One Solution? (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2022.32

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