Can Reducing Income Inequality Decouple Economic Growth from CO₂ Emissions?

Abstract

In the past two decades, income inequality has steadily increased in most developed nations. During this same period, the growth rate of CO2 emissions has declined in many developed nations, cumulating to a recent period of decoupling between economic growth and CO2 emissions. The aim of the present study is to advance research on socioeconomic drivers of CO2 emissions by assessing how the distribution of income affects the relationship between economic growth and CO2 emissions. The authors find that from 1985 to 2011, rising income inequality leads to a tighter coupling between economic growth and CO2 emissions in developed nations. Additionally, the authors find that increases in the top 20 percent of income earners’ share of national income have resulted in a larger association between economic growth and CO2 emissions, while increases in the bottom 20 percent of income earners’ share of national income reduced the association between economic growth and CO2 emissions.

The effect of income inequality on carbon dioxide emissions: A case study of Indonesia

“…The relationship pattern between income inequality and CO 2 emissions also depends on the interaction between income inequality and economic growth ( McGee and Greiner, 2018 ). The estimation results of Model 4 show that the interaction variable (GINI∗GDP) has a significant and positive effect in both the long-run and short-run as shown in Tables 4 and 5 respectively.…”

“…The McGee and Greiner Framework, 2018 was adopted and this involved the application of four types of model. Model 1 shown in Eq.…”

“…The trade-off was not confirmed in developed countries. Some studies have tried to explain the effect of the interaction between income inequality and economic growth on CO 2 emissions ( Hao et al., 2016 ; McGee and Greiner, 2018 ) by answering questions such as ‘Will high-income inequality adversely affect the environment?’ They have also tried to determine if income inequality influences economic growth and aggravates environmental pollution in the process ( Hao et al., 2016 ). Furthermore, McGee and Greiner (2018) emphasized the influence of income inequality on CO 2 emissions at a certain level depending on the dynamic relationship between income inequality and either income level or economic growth.…”

“…This curve later became known as the Environmental Kuznets Curve - EKC ( Chow and Li, 2014 ; Dinda, 2004 ). Meanwhile, Dietz and Jorgenson (2015) developed a structural human ecology approach based on interactions between humans and the environment in order to explore the effect of demographic variables such as population, urbanization, dependency ratio and household size on environmental degradation ( Li and Zhou, 2019 ; McGee and Greiner, 2018 ). Among these variables, urbanization and the dependency ratio have been widely recognized as the factors affecting CO 2 emissions ( Hamza and Gilroy, 2011 ; Li and Zhou, 2019 ; McGee and Greiner, 2018 ; O'Neil et al., 2012 ).…”

“…The framework with four proposed empirical models employed by McGee and Greiner (2018) was adopted to examine the effect of per capita GDP, urbanization, and dependency ratio on CO 2 emissions using the IPAT Model. It was also used to investigate the relationship between per capita GDP and CO 2 emissions using the EKC hypothesis framework and to evaluate the effect of income inequality on CO 2 emissions.…”