Analysing of the Relationship Among Poverty, Income Inequality, and Environmental Pollution Based on Kuznets Curve Model: Evidence from Developed Countries

Abstract

In this study, it is analysed that the relationship between carbon dioxide (CO2) emissions, income inequality, and poverty within the framework of the Environmental Kuznets Curve (EKC) in 14 developed countries over the period 2000-2018. The panel Fourier unit root test, Dynamic Seemingly Unrelated Regression (DSUR) estimator and panel causality test are applied to analyze the relationship between these variables. The results show that there is no significant relationship among poverty, income inequality, energy consumption and CO2 emissions. Moreover, it is found out that the EKC hypothesis, which suggests an inverted U-shaped relationship between per capita income and CO2 emissions, is valid in developed countries. Also, it is determined that the turning points are smaller than GDP per capita in fourteen countries.

Keywords

• Poverty
• Income inequality
• EKC
• Panel dynamic SUR
• Panel causality

References

1. Baloch, M.A., Danish, Khan, S.U.-D., Şentürk Ulucak, Z. & Ahmad, A. (2020). Analyzing the relationship between poverty, income inequality, and CO2 emission in Sub-Saharan African countries. Science of The Total Environment, 740, 139867.
2. Becker, R, Enders, W. & Lee, J. (2006). A stationarity test in the presence of an unknown number of smooth breaks. Journal of Time Series Analysis, 27(3), 381-409.
3. Breitung, J. (2001). The local power of some unit root tests for panel data. In: Baltagi BH, Fomby TB, Carter Hill, R (Ed) Nonstationary Panels, Panel Cointegration, and Dynamic Panels (Advances in Econometrics 15), Emerald Group Publishing Limited, Bingley, 161-177.
4. Breusch, T.S. & Pagan, A.R. (1980). The lagrange multiplier test and its applications to model specification tests in econometrics. Review of Economic Studies, 47(1), 239-53.
5. Carrion-i Silvestre, J.L., Barrio-Castro, T.D. & Lopez-Bazo, E. (2005). Breaking the panels: an application to the gdp per capita. Econometrics Journal, 8(2), 159- 175.
6. Cole, M.A., Raymer, A.J. & Bates, J.M. (1997). The Environmental Kuznets curve: an empirical analysis. Environment and Development Economics, 2(4), 401-416.
7. Dhrifi, A., Jaziri, R. & Alnahdi, S. (2020). Does foreign direct investment and environmental degradation matter for poverty? evidence from developing countries. Structural Change and Economic Dynamics, 52, 13-21.
8. Emirmahmutoglu, F. & Kose, N. (2011). Testing for Granger causality in heterogeneous mixed panels. Economic Modelling, 28, 870–876.

9. Galor, O. & Moav, O. (2004). From physical to human capital accumulation: inequality and the process of development. Review of Economic Studies, 71(4), 1001-1026.
10. Grossman, G.M. & Krueger, A.B. (1995). Economic growth and the environment. Quarterly Journal of Economics, 110(2), 353-377.
11. Grunewald, N., Klasen, S., Martinez-Zarzoso, I. & Muris, C. (2017). The trade-off between income inequality and carbon dioxide emissions. Ecological Economics, 142, 240-256.
12. Hao, Y., Chen, H. & Zhang, Q. (2016). Will income inequality affect environmental quality? analysis based on China’s provincial panel data. Ecological Indicators, 67, 533-542.
13. Hassan, S.A., Zaman, K. & Gul, S. (2015). The relationship between growth-inequality-poverty triangle and environmental degradation: unveiling the reality. Arab Economics and Business Journal, 10, 57-71.
14. Holtz-Eakin, D. & Selden, T.M. (1995). Stoking the fires? CO2 emissions and economic growth. Journal of Public Economics, 51(1), 85-101.
15. Im, K.S., Pesaran, M.H. & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115(1), 53-74.
16. Jin, G., Fu, R., Li, Z., Wu, F. & Zhang, F. (2018). CO2 emissions and poverty alleviation in China: an empirical study based on municipal panel data. Journal of Cleaner Production, 202, 883-891.
17. Jorgenson, A., Schor, J. & Huang, X. (2017). Income inequality and carbon emissions in the United States: a state-level analysis, 1997-2012. Ecological Economics, 134, 40-48.
18. Khan, A.Q., Saleem, N. & Fatima, S.T. (2018). Financial development, income inequality, and CO2 emissions in Asian countries using STIRPAT model. Environmental Science and Pollution Research, 25, 6308-6319.
19. Khan, S.A.R. (2019). The nexus between carbon emissions, poverty, economic growth, and logistics operations-empirical evidence from Southeast Asian countries. Environmental Science and Pollution Research, 26(13), 13210-13220.
20. Knight, K.W., Schor, J.B. & Jorgenson, A.K. (2017). Wealth inequality and carbon emissions in high-income countries. Social Currents, 4, 403-412.
21. Koçak, E., Ulucak, R., Dedeoğlu, M. & Ulucak, Z.Ş. (2019). Is there a trade-off between sustainable society targets in Sub-Saharan Africa? Sustainable Cities and Society, 51, 101705.
22. Kurozumi, E. (2002). Testing for stationarity with a break. Journal of Econometrics,108(1), 63-99.
23. Kusumawardani, D. & Dewi, A.K. (2020). The effect of income inequality on carbon dioxide emissions: a case study of Indonesia. Heliyon, 6(8), e04772.
24. Levin, A., Lin, C. & Chu, C.J. (2002). Unit root tests in panel data: asymptotic and finite-sample properties. Journal of Econometrics, 108, 1-24.
25. List, J.A. & Gallet, C.A. (1999). The Kuznets Curve: what happens after the inverted-U? Development Economics, 3(2), 200-206.
26. Liu, Q., Wang, S., Zhang, W., Li, J. & Kong, Y. (2019). Examining the effects of income inequality on CO2 emissions: evidence from non-spatial and spatial perspectives. Applied Energy, 236, 163-171.
27. Mark, N.C., Ogaki, M. & Sul, D. (2005). Dynamic seemingly unrelated cointegrating regressions. Review of Economic Studies, 72(3), 797-820.
28. McGee, J.A. & Greiner, P.T. (2018). Can reducing income inequality decouple economic growth from CO2 emissions? Socius, 4, 1-11.
29. Nazlioglu, S. & Karul, C (2017). A panel stationarity test with gradual structural shifts: re-investigate the international commodity price shocks. Economic Modelling, 61, 181-192.
30. Nielsen, F. & Alderson, A.S. (1997). The Kuznets Curve and the great U-turn: income inequality in U.S. counties, 1970 to 1990. American Sociological Review, 62(1), 12-33.
31. Paweenawat, S.W. & McNown, R. (2014). The determinants of income inequality in Thailand: a synthetic cohort analysis. Journal of Asian Economics, 31-32, 10-21.
32. Pesaran, H.M., Ullah, A. & Yamagata, T. (2008). A bias-adjusted LM test of error cross-section independence. Econometrics Journal, 11(1), 105-127.
33. Rizk, R. & Ben Slimane, M. (2018). Modelling the relationship between poverty, environment, and institutions: a panel data study. Environmental Science and Pollution Research, 25, 31459-31473.
34. Saqib, M. & Benhmad, F. (2021). Updated meta-analysis of Environmental Kuznets curve: where do we stand? Environmental Impact Assessment Review, 86, 106503.
35. Trenberth, K.E., Fasullo, J.T. & Shepherd, T.G. (2015). Attribution of climate extreme events. Nature Climate Change, 5, 725-730.
36. Uzar, U. & Eyuboglu, K. (2019). The nexus between income inequality and CO2 emissions in Turkey. Journal of Cleaner Production, 227, 149-157.
37. Westerlund, J. (2012). Testing for unit roots in panel time-series models with multiple level breaks. The Manchester School, 80(6), 671–699.
38. Wolde-Rufael, Y. & Idowu, S. (2017). Income distribution and CO2 emission: a comparative analysis for China and India. Renewable and Sustainable Energy Reviews, 74, 1336-1345.
39. Zaman, K., Shah, I.A., Khan, M.M. & Ahmad, M. (2011). Exploring the link between poverty-pollution-population (3Ps) in Pakistan: time series evidence. Journal of Economics and Sustainable Development, 2(11-12), 1-27.