Modeling maladaptation in the inequality–environment nexus

Adaptation against environmental degradation has the potential to generate further environmental pressures. Does this aspect of adaptation affect the inequality–environment link? To answer this question, we develop a one-sector and one-input model which integrates threats to social and environmental sustainability posed by feedback effects of agents’ adaptation strategies. We distinguish between income inequality and welfare inequality with the latter depending on environmental quality, leisure time, income level and allocation of income to consumption or adaptation. Despite its parsimony, the model describes the conditions for the existence of different inequality–environment dynamic regimes. The model confirms the standard view that environmental degradation exacerbates welfare inequality, but it also produces non-trivial and surprising insights. It illustrates that income inequality affects the type of dynamic regime followed by the economy. High-income economies and economies with high-income inequality are most at risk of following a pattern of maladaptive growth with increasing welfare inequality and environmental pressure.