Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/267497 
Year of Publication: 
2022
Series/Report no.: 
Working Paper No. 032.2022
Publisher: 
Fondazione Eni Enrico Mattei (FEEM), Milano
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.
Subjects: 
Inequality
Climate Change
GHG Emissions
Environmental Kuznets Curve
Sustainable Development Goals
Political Economy
JEL: 
Q53
Q56
O15
Document Type: 
Working Paper

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