The impact of income inequity on energy consumption: The moderating role of digitalization

Abstract

Income inequity and energy consumption have become important issues for sustainable development, and digitalization offers unlimited potential for bridging the income gap and decreasing energy consumption. Based on an international perspective, we confirm the impact of income inequality on energy consumption in 108 countries from 2000 to 2019 and then explore the moderating and threshold effects of digitalization on the impact of income inequality on energy consumption. The empirical results indicate that income inequality causes a surge in energy consumption, and the dynamic SYS–GMM results suggest that for every 1 unit increase in income inequality, energy consumption increases by 0.003 unit. The moderating effect suggests that digitalization helps mitigate the impact of a 3.654% surge in energy consumption caused by income inequality. In comparison, digitalization has a significant moderating effect on energy consumption in middle- and high-income countries (Europe, the Americas, and the Asia-Pacific region), and the moderating effect of digitalization is effective in both free and non-free economies. The dynamic SYS–GMM threshold panel models reveal a non-linear relationship between income inequality and energy consumption affected by digitalization. This provides international evidence that reveals the underlying mechanisms of digitalization, income inequality, and energy consumption. It will better guide countries in harnessing digital dividends to overcome the twin dilemmas of the income gap and energy poverty.