Revisiting the relationship between income inequality and CO2 emissions in the USA: new evidence from CS-ARDL model

Abstract

Both theoretically and empirically, the association between income inequality and CO2 emissions is ambiguous. Hence, considering the short- and long-term dynamics of income inequality on carbon emissions, as well as the heterogeneity of the emission distribution, this paper employed cross-sectional autoregressive distributed lag (CS-ARDL) approach over the period 1990-2018 and extended revisiting the effect of income inequality on carbon emissions across US states by considering human development index. The study finds that higher income inequality tends to exacerbate US carbon emissions in the long term. Additionally, the study validates the EKC hypothesis by demonstrating that carbon emissions rise with lower income levels and diminish with higher income levels. Population growth leads to increased carbon emissions in the short and long term, while human development index has a negative impact on carbon emissions in the short run. The findings are vigorous to various causality tests. Policy recommendations are further discussed.