The Nexus Between Poverty, Inequality and Environmental Pollution: Evidence Across Different Income Groups of Countries

Abstract

Even though the literature has extensively focused on a number of determinants of environmental pollution, it lacks to incorporate the importance of poverty and inequality on the environment. The nexus of poverty-inequality-environment is indeed in line with the agenda of the United Nations' Sustainable Development Goals. Furthermore, the existing studies usually rely on carbon dioxide (CO2) emissions as the proxy for the pollution in their analysis. This study fills the mentioned gaps by investigating the impacts of income inequality and poverty on environmental pollution using ecological footprint (a comprehensive measure of the pollution) in addition to CO2 emissions for 70 countries categorized by income groups. This research employs the dynamic panel system Generalized Method of Moments (GMM) and the Dumitrescu-Hurlin Granger causality techniques which are strong to several econometric issues that may frequently arise in the estimation procedures. The empirical outcomes show that income inequality and poverty increase carbon emissions and ecological footprint in the entire panel. However, when the panel is split into groups, the results indicate that income inequality mitigates carbon emissions and ecological footprint in high-income group but aggravates them in middle-income group. Though poverty has no significant impact on carbon emissions in high-income group, it raises the levels of carbon emissions and ecological footprint in middle-income group. This study overall implies that income inequality and poverty are significant determinants of environmental pollution. Hence, efforts to abate envi-ronmental degradation should give adequate attention to poverty and inequality in order to attain environmental sustainability.