Estimating the threshold interactions between income inequality and carbon emissions

This paper aims to examine the worldwide interactions between income inequality and carbon emissions, and the nonlinear threshold roles of globalization, income inequality and economic growth. To fulfill this task, we propose a dynamic panel threshold model with cross-sectional dependence, based on a balance panel data of 92 countries over the period 1991-2015. The results suggest the presence of nonlinear effects of threshold variables, which have asymmetric impacts on the negative relationships between income inequality and carbon emissions. Further, we find that the promotion of globalization significantly contributes to reduce the effect of income unfairness improvement on the increase of carbon emissions, and this similar effect could also be achieved through shrinking income inequality per se and spurring economic growth. We therefore suggest the stakeholders keep working on pushing the reinforced trend of globalization when weighting the trade-offs between income inequality alleviation and carbon emission mitigation.