The emission-inequality nexus across stages of development

Does a more unequal society emit more CO2? The nexus between carbon emissions and income inequality has been at the core of a vast literature, which has yielded conflicting results. Leveraging panel econometric techniques, we provide robust evidence of a non-linear relationship that depends on the structural composition of the economy. Specifically, we document a positive association between income inequality, measured with five different indicators, and per capita carbon emissions in highly tertiarized countries. In contrast, the relationship in non-service-intensive economies turns negative. We provide evidence for plausible mechanisms mediating this non-linear association: the carbon footprint of the richest individuals -particularly when linked to investment- and the employment share in industry are key factors underlying the observed patterns. Our results point to the stage of "development" as a crucial factor shaping the emission-inequality nexus. Indeed, it helps identify countries for which fighting inequality comes with climate-related benefits.