Does inequality affect environmental quality? Evidence from major Japanese cities

This study investigates whether income inequality affects environmental degradation. We use city-level data in Japan, where local governments have limited authority and often use voluntary agreements with private firms. We test the hypothesis that inequality weakens residents' bargaining power over polluters and has a negative effect on environmental quality. Our results show that inequality negatively affected air quality in residential and commercial areas during the 1990s but not in industrial areas. This evidence suggests that the inequality-pollution relationship is not just a correlation but reflects a causal effect of residents' bargaining power on environmental quality. This implies that equal communities can pressure firms into accepting pollution prevention agreements. (C) 2016 Elsevier Ltd. All rights reserved.