Income inequality and CO2 emissions in the G7, 1870–2014: Evidence from non-parametric modelling

Abstract

We examine whether income inequality effected carbon emissions in what are now the world's wealthiest countries over the period 1870–2014. Employing a non-parametric panel estimation method with cross-sectional and time-varying coefficients, we find that the relationship between income inequality and CO 2 emissions is highly non-linear. In terms of signs and significance, the nonparametric coefficient function for income inequality is found to vary over the period 1870–2014. Income inequality exhibits a significant positive effect from 1870 to 1880 and a significant negative impact from 1950 to 2000 on CO 2 emissions. We also find that for extended periods between 1881 and 1949 and between 2000 and 2014, there is no significant relationship between the two variables. • Examines the effect of income inequality on CO 2 emissions • Presents non-parametric panel estimates for the G7 between 1870 and 2014. • CO 2 emissions can evolve over time in the form of an unknown functional form. • The relationship between income inequality and CO 2 emissions is highly non-linear. • The time-varying coefficients are mostly insignificant, but negative 1950 to 2000.