International pressure to meet climate and sustainability goals are mounting. Countries attempting to industrialize in the age of sustainability are tasked with industrializing using low-carbon practices. The transition to a “green” economy requires elimination of some jobs and skillsets that may upset social equality. This paper empirically examines the hypothesis that policies aimed at increased environmental performance promote increased income inequality in developing countries. Because existing literature firmly supports the hypothesis that lower income inequality leads to higher environmental performance, this paper develops a simultaneous equations model (SEM) to estimate the hypothesized endogenous relationship using two stage least squares (2SLS) estimation with an instrumental variable. While the instrumental variables employed were not per se valid, the 2SLS estimation results for the sample of developing countries reflects a positive and practically large, though statistically insignificant effect of air quality on income inequality.
Skinner, Haley K.
"Unsustainable Sustainability: Do Policies that Increase Environmental Quality Exacerbate Income Inequality?,"
Gettysburg Economic Review: Vol. 11
, Article 7.
Available at: https://cupola.gettysburg.edu/ger/vol11/iss1/7