Inequality and the Environment: Impact and Way Forward

Abstract

Economic and financial crisis thwarts the process of global economic growth, development, integration, and efforts to promote a sustainable environment. The onset of the recent crisis aggravates the problem of inequality and more resources need to be channeled for economic recovery. This study attempts to examine the impact of income inequality on environmental pollution in a sample of an unbalanced panel of 120 countries which consist of 42 high-income, 35 upper-middle-income, and 43 lower-middle- and low-income countries. The sample period runs from 1985 to 2019. The empirical results are quantitatively robust to a different alternative of proxy. Results affirmed an inverted U-shaped relationship between income inequality and environmental pollution for lower-middle- and low-income countries. The Environmental Kuznets Curve (EKC) hypothesis is present in the case of upper-middle, lower-middle- and low-income countries but not for high-income countries. The policy implication based on these findings is policies must be coordinated to cushion the impact of income inequality to enable more allocation for environmental protection such as measures to reduce carbon dioxide (CO2) emissions. Despite the crisis and economic slowdown, countries should take the opportunity to review their recovery plans by incorporating environmental concerns.