Income inequality and CO2 emissions: nonlinear evidence from Turkey

The income inequality-economy link has been argued by researchers a long time. But the impact of income inequality on environmental pollution is a new investigation topic for developing countries. Turkey is well known as an emerging economy which has a high level of income inequality and CO2 emissions. Therefore, this paper concentrates on the income inequality-CO2 emissions link in Turkish economy by applying a nonlinear analysis. This paper integrates economic growth and financial development to the CO2 emissions specification over the period of 1987–2019. We employ the nonlinear autoregressive distributed lag approach to explore the long-run nonlinear linkages between the series. Our findings reveal an asymmetric cointegration among variables. Positive and negative income inequality shocks positively affect CO2 emissions implying that positive and negative shocks of income inequality enhance CO2 emissions in the long run. Negative economic growth shocks decrease CO2 emissions, while positive shocks to financial development increase CO2 emissions in the long run. We provide important policy suggestions that might be useful to the policymakers to decrease CO2 emissions in Turkey.