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Income Inequality and Environmental Degradation in Middle-Income Countries: A Test of Two Competing Hypotheses

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  • Ibrahim Mohamed Ali Ali

    (Sadat Academy for Management Sciences
    Shaqra University)

Abstract

The relationship between income inequality and environmental degradation is still a global concern of empirical research. In this study, two main hypotheses concerning this relationship are tested using data from a panel of 42 middle-income countries (MICs) over the period 1990–2016. The results adopted from two different methodologies based on panel quantile regression techniques emphasize a trade-off relationship between inequality and environmental degradation, which supports the marginal propensity to emit (MPE) hypothesis rather than the political economy (PE) hypothesis in understanding the impact of inequality on environmental degradation in MICs. This finding leaves policymakers in MICs facing a difficult choice: either reducing inequality or improving the environment because the two goals are not achieved simultaneously according to the results. The results also confirm the existence of the environmental Kuznets curve (EKC) across all quantiles. The effect of economic growth in MICs turns to improve environmental indicators in the long run. Accordingly, the study recommends that MICs give priority to reducing income inequality to ensure the continuity of achieving economic growth that improves environmental indicators in the long run, according to the EKC.

Suggested Citation

  • Ibrahim Mohamed Ali Ali, 2023. "Income Inequality and Environmental Degradation in Middle-Income Countries: A Test of Two Competing Hypotheses," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 166(2), pages 299-321, April.
    • Handle: RePEc:spr:soinre:v:166:y:2023:i:2:d:10.1007_s11205-023-03068-y
    DOI: 10.1007/s11205-023-03068-y
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    More about this item

    Keywords

    Environmental degradation; Income inequality; Marginal propensity to emit; Quantile regression with fixed effect; Method of moments quantile regression;
    All these keywords.

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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