The Relationship between Income Inequality and CO2 Emissions: Empirical Evidence from OECD and Non-OECD Countries

Purpose - This study analyzed the relationship between income inequality and environmental pollution, which was not addressed in the relationship between economic growth and income inequality (or environmental pollution), as discussed in the Kuznets curve (or environmental Kuznets curve). Design/Methodology/Approach - From 1995 to 2019, 136 countries were segmented by income and the level of income inequality, and a panel analysis was conducted on the nexus between economic growth, income inequality, and CO2 emissions. Based on the estimation results, a non-linear relationship was established between economic growth, income inequality, and CO2 emissions, depending on the income level. Findings - Developed countries exhibited an inverted U-shaped relationship between income inequality and CO2 emissions. Additionally, CO2 emissions vary depending on the degree of income inequality. In countries with relatively high-income inequality, CO2 emissions increased sensitively with economic growth, and a U-shaped relationship was observed between income inequality and CO2 emissions. Research Implications - These conclusions show that solving income inequality can be another way to solve environmental problems, and that solving income inequality and environmental problems simultaneously is the ultimate solution for sustainable development. In addition, introducing policies to reduce the gap between the rich and the poor in countries with relatively high income inequality can solve environmental problems more effectively.