Income inequality and the trade-off between socio-economic and ecological goals

Abstract

At present, no country manages to meet basic social needs without exceeding ecological limits. However, there is considerable variation across countries in the amount of environmental degradation incurred to achieve given living standards. This paper investigates whether income inequality plays a moderating role in this trade-off. Using a cross-sectional panel approach with a global sample over the period from 1992 to 2015, we examine whether more income-equal countries achieve the same living standards with less environmental degradation. We find that lower inequality alleviates the trade-off between socioeconomic and ecological goals in lowincome and high-income countries: those with more equal income distributions achieve the same living standards at relatively lower ecological degradation levels. The opposite results in middle-income countries. We discuss patterns in the marginal propensity to consume and to emit as a potential explanation.

Keywords: Inequality, Planetary boundaries, Socio-economic minimum standards, Social-environmental goal trade-off