The interaction of income inequality and urbanization in affecting environmental quality: International evidence

ABSTRACT This research examines how income inequality interacts with urbanization in its influence on carbon dioxide emissions. We analyze national level data of 95 countries between 1961 and 2015 using the system generalized method of moments to explore the nature of interactions. The results indicate that the environmental impact of income inequality varies with the rise of urbanization. Environmental performance of developing communities improves initially, but when the urbanization ratio is above 35.2 per cent, inequality suppresses progress in environmental performance until the urbanization ratio is greater than 55.7 per cent. This inverted U shape relationship adds further evidence on the conflicting views on the interactions between the two social justice and environmental quality goals of development. While aggregate data often masks within-country variations, these analyses provide valuable insights for policymakers about the forces influencing these aggregate measures and the importance of local context in tackling environmental issues of development.