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The dependence between income inequality and carbon emissions: A distributional copula analysis

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  • Dorn, Franziska
  • Maxand, Simone
  • Kneib, Thomas

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 potential bi-directional transmission channels. Specifically, consumption, energy sources and the political system are potential 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.

Suggested Citation

  • Dorn, Franziska & Maxand, Simone & Kneib, Thomas, 2021. "The dependence between income inequality and carbon emissions: A distributional copula analysis," University of Göttingen Working Papers in Economics 413, University of Goettingen, Department of Economics.
    • Handle: RePEc:zbw:cegedp:413
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    References listed on IDEAS

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    More about this item

    Keywords

    Bivariate distributional copula model; income inequality; carbon emission; social sustainability; ecological sustainability;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • 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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