CO₂ emissions, income inequality, and country risk: some international evidence

This research explores the effects of income inequality and country risk on CO₂ emissions and examines whether the effects change across countries with different development stages or income levels. A new panel quantile regression approach is used to conduct a comprehensive analysis of the impacts of affecting factors on CO₂ emissions at various quantiles, while addressing econometric challenges such as endogeneity and heterogeneity. From a global perspective, we can conclude that the marginal impact of inequality on emissions drops constantly with decreasing country risk at 10th to 50th quantiles, which even performs negative, whereas at the other quantiles, the marginal impact of inequality always remains negative. When we focus on the different income groups, the nexus of inequality emissions is negative first and then positive with decrease of country risk in low-income countries but shows no significant in low-middle- and upper-middle-income countries. Additionally, we validate the detrimental impact of income inequality in upper-income countries. Besides, country risk adversely moderates the nexus of inequality and emissions in low- and upper-income countries. Empirical results confirm that the nexus of inequality emissions lies in country risk, income level, and existing emission degree. These findings provide some important recommendations for policy-makers.