The Impact of Income Inequality on Carbon Emissions in Asian Countries: Non-Parametric Panel Data Analysis

Widening income inequality and environmental degradation are two of the most important problems that threat the sustainable development. For that, this study aims to examine the effect of income distribution on CO2 emissions in seven Asian countries over the period 1971–2014 using a non-parametric panel estimation method and time-varying coefficients. Specifically, we apply the local linear dummy variable estimator (LLDVE) approach that allows evaluating the coefficients which vary over time for the panel data models. The results reveal that there is a strong non-linear correlation between income inequality and per capita CO2 emissions. The non-parametric model suggests that there is a negative relationship between income inequality and environment degradation over the whole study period expect for the period 1988–1997 which was positive. Our findings broadly support the existence of the "equity-pollution dilemma", whereby income redistribution induces environmental pollution. This dilemma has potential implications for policies designed to promote redistribution in the selected Asian countries.