Examining the relations of income inequality and carbon productivity: A panel data analysis

Given growing threats to sustainable development, two important and urgent issues have emerged− rising income inequality and environmental degradation. This is particularly relevant in China because, on the one hand, China has had the largest annual carbon emissions in the world since 2006, and on the other, China's urbanization in the last 40 years has led to continuously rising economic inequality. This study uses panel data from 1995 to 2017 to show how rural-urban income inequality has impacted carbon productivity. The research findings support our position that income inequality has had significant negative effects on carbon productivity, with a coefficient of -0.113. The effects are more noticeable in the Western and Central regions. Moreover, though technology innovation and labor productivity can assist in rectifying the externalities caused by a high level of carbon productivity, they both negatively moderate the relationship between income inequality and carbon productivity with coefficients of -0.180 and -0.417, respectively. Low-carbon policies focusing on facilitating technology innovation and labor productivity without “complementary support” for narrowing income inequalities may yield unwanted outcomes. The findings also shed new light on the dynamic relationship between income inequality and carbon productivity, and provide important insights for policymakers to tackle the dual tasks of reducing inequality and mitigating climate change.