Accelerating urbanization serves to reduce income inequality without sacrificing energy efficiency – Evidence from the 78 countries

Abstract

Income inequality refers to the uneven distribution of wealth among population, amongst the discussion it has generated, the issue of equality-based efficiency has become a development goal pursued by many countries. In order to better understand the relationship between income inequality and energy efficiency, the static threshold effect approach and the dynamic threshold effect approach were applied in this article based on panel data of 78 countries. In these approaches, income inequality is the explanatory variable, urbanization and industrialization are the threshold variables, while energy efficiency is the explained variable. The results show that there is a positive coefficient between income inequality and energy efficiency, and the coefficient of this positive relationship decreases when urbanization level rises above the two thresholds 42.68% and 93.16% respectively, and so does it when industrialization level rises above 12.76% and 19.12%. In addition, urbanization plays a greater role than industrialization in reducing the correlation between income inequality and energy efficiency. Therefore, accelerating industrialization, especially urbanization, can serve to reduce income inequality without sacrificing energy efficiency.