Economic growth, inequality and environmental degradation

This paper re-examines the relationship between economic growth and environmental degradation and tests the validity of the environmental Kuznets curve (EKC) hypothesis by considering the role of income inequality. Using the ecological footprint (EF) as a consumption-based indicator of environmental degradation and the most comprehensive income inequality data available, we demonstrate that the environmental impact of economic growth depends on the distribution of income. We find evidence of an EKC relationship between the EF and economic growth; however, this result is conditional upon a perfectly egalitarian distribution of within-country income. For higher degrees of income inequality, we find no evidence of a 'turning point' within an empirically feasible range. These results suggest that when the gains of economic growth are concentrated the associated rate of environmental degradation is greater than when they are more broadly shared.