The Nonlinear Dependence of Income Inequality and Carbon Emissions: Potentials for a Sustainable Future

57 Pages Posted: 22 Mar 2021 Last revised: 29 Oct 2021

See all articles by Franziska Dorn

Franziska Dorn

University of Goettingen (Göttingen)

Simone Maxand

Humboldt University of Berlin

T. Kneib

University of Goettingen (Göttingen)

Multiple version iconThere are 2 versions of this paper

Date Written: February 8, 2021

Abstract

High levels of carbon emissions and rising income inequality are interconnected challenges for the global society. Commonly-applied linear regression models fail to unravel the complexity of bidirectional transmission channels. In particular, consumption, energy sources, the structure of the economy and the political system are determinants of the strength and direction of the dependence between emissions and inequality. To capture their impact, this study investigates the conditional dependence between income inequality and emissions by applying distributional copula models on an unbalanced panel data set of 154 countries from 1960 to 2019. A comparison of high-, middle- and low-income countries contradicts a linear relationship and sheds light on heterogeneous dependence structures implying synergies, trade-offs and decoupling between income inequality and carbon emissions. Based on the conditional distribution, we can identify determinants associated with higher/lower probabilities of a country falling in an area of potential social and environmental sustainability. The results imply that the joint activation of multiple channels opens the way for a sustainable future.

Keywords: Bivariate distributional copula model, income inequality, carbon emission, social sustainability, ecological sustainability

JEL Classification: C14, C46, D63, Q56

Suggested Citation

Dorn, Franziska and Maxand, Simone and Kneib, T., The Nonlinear Dependence of Income Inequality and Carbon Emissions: Potentials for a Sustainable Future (February 8, 2021). Available at SSRN: https://ssrn.com/abstract=3800302 or http://dx.doi.org/10.2139/ssrn.3800302

Franziska Dorn (Contact Author)

University of Goettingen (Göttingen) ( email )

Wilhelmsplatz 1
Göttingen, 37073
Germany

Simone Maxand

Humboldt University of Berlin ( email )

Unter den Linden 6
Berlin, Berlin 10099
Germany

T. Kneib

University of Goettingen (Göttingen)

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

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