REVIEW OF SOCIAL ECONOMY, VOL. LXVIII, NO.

4, DECEMBER 2010

Is Inequality Harmful for the Environment? An

Empirical Analysis Applied to Developing and
Transition Countries
Matthieu Clement and Andre Meunie
GREThA, Universite de Bordeaux, France

Abstract The object of this article is to examine the relation between social
inequalities and pollution. First of all we provide a survey demonstrating
that, from a theoretical point of view, a decrease in inequality has an uncertain
impact on the environment. Second, on the basis of these conceptual considerations, we propose an econometric analysis based on panel data (xedeects and dynamic panel data models) concerning developing and transition
countries for the 19882003 period. We examine specically the eect of
inequality on the extent of local pollution (sulphur dioxide emissions and
organic water pollution) by integrating the Gini index into the formulation of
the environmental Kuznets curve.
Keywords: pollution, inequality, environmental Kuznets curve, panel data

INTRODUCTION
The scale and intensication of environmental deteriorations caused by
current modes of development present a signicant challenge for the longterm viability of globalization. Neoclassical authors argue that the market
remains the most ecient institution for integrating ecological constraints
(Dales 1968), on the double condition that such externalities are internalized
and that technological progress steadily becomes more widespread. Heterodox economists contest this optimistic version of market failures, and call for
the adoption of a dierent paradigm of economic development (Ostrom
1990).
Analysis of the relations between human activities and the environment is
based on the concept of sustainable development (WCED 1987). The three
Review of Social Economy
ISSN 0034-6764 print/ISSN 1470-1162 online 2010 The Association for Social Economics
http://www.informaworld.com
DOI: 10.1080/00346760903480590

REVIEW OF SOCIAL ECONOMY

pillars of sustainable development (economic, social and ecological factors)

should interact to direct society towards long-term viable growth. In order to
calibrate the conditions of sustainability, most of the authors in the eld
focus on the connection between the economic and environmental spheres.
The object of this paper is to examine the eects of the inclusion of social
relations within this framework.
Up until the 1990s, and in line with the neoclassical paradigm, a number of
empirical studies argued that economic growth and the respect of ecological
constraints could be achieved in the long term. Known as the Environmental
Kuznets Curve (EKC), this analysis postulates that the relation between
polluting emissions and per capita gross domestic product (GDP) levels
follows an inverted-U curve (World Bank 1992; Selden and Song 1994;
Grossman and Krueger 1995). The dynamics of individual wealth accumulation impact on pollution levels as a result of the combination of three
structural eects. The scale eect isolates the impact of an increase of
economic activity, estimating the additional quantity of pollution that
would be generated if the intensity in GDP emissions remained constant.
The composition eect assesses the consequences of sector-based mutations
throughout the development process. First, the transition from a rural
economy to an urban and industrial society tends to increase pollution levels.
The decline in heavy energy-intensive industries as well as the emergence of
the service sector then releases the ecological constraint by exerting a
lowering action on the intensity of GDP emissions. The technological eect
reects the decisive impact of organizational and scientic progress. At a
certain level of wealth, both states and enterprises have at their disposal
human and nancial means to incur consistent research and development
(R&D) costs by way of promoting innovations for greater ecological
eciency in manufacturing processes. The existence of an EKC assumes
therefore that beyond a certain threshold of per capita income, the two
latter eects more than make up for the scale eect. This path can also be
promoted by the dynamics of consumer choice, e.g. if increasing awareness causes an autonomous shift in public demands for environmental
safeguards (Grossman and Krueger 1995: 370).
One of the main criticisms commonly levelled against EKC concerns its
deterministic nature (Grimes and Roberts 1997). If wealthy economies are
able to reduce the polluting emissions generated by economic growth, they
set an example for national models of capital accumulation in developing
countries. Beyond the similarities with Rostows controversial approach, it
is not possible to claim that current developments in rich countries would
apply in the future to developing countries, even in the cases where EKC
414

IS INEQUALITY HARMFUL FOR THE ENVIRONMENT?

appears to be conrmed. Another criticism concerns the omission of

explanatory variables in econometric studies, the eect of which would be
to curve the EKC articially. We suggest that social inequalities could be one
of these omitted variables.1 This article therefore seeks to examine the
relation between social inequalities and pollution.
The rst part of this study provides a synthesis of theoretical and empirical
studies of the relation between wealth inequalities and pollution. The second
part describes the samples and data used for the purposes of the study.
In a third part, several econometric investigations are described in order
to highlight a number of stylized facts concerning the relation between
inequalities and two specic pollutants (sulphur dioxide emissions and
organic water pollution) in developing and transition countries throughout
the 19882003 period.
THE IMPACT OF INEQUALITY ON THE ENVIRONMENT:
A CRITICAL ANALYSIS OF THE ENVIRONMENTAL KUZNETS
CURVE
In this section, we provide an outline of the main arguments concerning
the relation between inequality and environmental quality. Since pollutants
have varied sources and dierent environmental eects, they obey dierent
dynamics; we suggest therefore that there is no unique sequence. However,
most of the empirical studies in the eld conclude that inequality has a
negative impact on the environment.
An Uncertain Economic Impact
The power-weighted social decision rule. In the neoclassical paradigm,
pollution is viewed as a public good that generates some externalities and
market failures. It should be noted therefore that there is no spontaneous and
universal movement behind the EKC, as Arrow et al. (1995) were keen to
point out in their seminal paper. The shape of the curve is primarily the result
1 The issue of pollution havens is a reection of this controversy at an international level. If environmental
legislations in northern countries go together with a relocation of their most polluting industries in
developing countries (with less stringent standards), the inverted-U curve then loses its pertinence. EKC is
the result of the capacity of consumers in the wealthiest countries to lay the burden of the pollution caused
by production activities on populations living in less developed countries (Mani and Wheeler 1998; Rock
1996). Development inequalities have an upward inuence on ecological deteriorations in the poorest
countries. The pollution havens hypothesis exhibits one aspect of the impact of inequalities on EKC
dynamics. However, within the framework adopted in this paper, we focus on social and power inequalities
at a national level.

415

REVIEW OF SOCIAL ECONOMY

of public regulation. According to Grossman and Krueger (1996: 120), if

environmental improvements are mediated by changes in government policy,
then growth and development cannot be a substitute for environmental
policy. Public policies can thus be seen as a mediator in the relation between
GDP per capita and pollution, especially through the mobilization of
regulating tools (norms, taxes or ad hoc markets).
However, the interests related to environmental uses are in conict.
Regulators are required to stabilize individual and collective behaviours to
enable the emergence of conventions required for sustainable development.
Indeed, the causes and consequences of polluting activities do not aect
every actor in the same way. For instance, capital holders have an immediate
interest in pursuing production at a minimum cost or, in other words, in
externalizing the social costs of polluting activities. More often than not, the
victims are not capital holders, but are instead the very users of the degraded
ecosystems. Public intervention therefore depends on an adequate representation of these groups.
In this way, Boyce (1994, 2007, 2008) formalizes the eects of power
inequalities between winners and losers according to pollution levels. The
neoclassical theory suggests two ideal-type situations: laissez-faire and
social optimality a` la Coase. In the rst case, the winners ignore the
costs born by the victims and pursue their polluting activity until the point
where the marginal benets become null. The pollution level is then maximal.
If the winners are forced to take account of the increasing marginal costs
of the losers, then social optimality is reached when these costs equal the
marginal benets of the polluters. Nevertheless, the existence of transaction
costs produces an actual result situated somewhere between these two ideal
types.
Boyce argues that power inequalities between winners and losers, dened
as the ability to bear transaction costs, produce a compromise that diverges
from the social optimum. This new decision rule is known as the powerweighted social decision rule (PWSDR). According to Boyce, the direction of
the PWSDR is not indeterminate. In most cases, those who benet from
deteriorations are those who have a greater relative power; the power of a
group is positively correlated to its level of relative wealth. Thus, the stronger
the social inequalities are, the more able the wealthiest people are to maintain
their interests. Yet the latter are also those who reap the greatest benets
from environmental deterioration. Wealthy people are therefore at the root
of a wider range of production and frequently consume goods that are more
polluting (such as large-engine cars) than those used by poor people. Boyce
names the relation between wealth inequalities, power inequalities and
416

IS INEQUALITY HARMFUL FOR THE ENVIRONMENT?

pollution the equality hypothesis, reecting the idea that greater social
equality favours the preservation of environmental quality.
Boyce provides several additional arguments that imply a negative
inuence of inequality on environmental quality. First, ecological irreversibility implies that a modication of power favouring those who benet from
deteriorations increases the long-term under-optimality of pollution levels,
but the opposite cannot work if degradations have already occurred and
have become irreparable. Second, environmental valuation produces a
shadow price integrated in the price vector. However, price formation is
inuenced by the ability to pay, which depends on the initial distribution of
wealth. The level of social inequalities is thus an additional channel of
inuence for the well-to-do classes. Likewise, access to information is more
dicult for poor people and, although they tend to be the victims, they also
underestimate the impact of environmental deterioration. Besides, wealthy
people have the ability to shape social compromises through the manipulation of information via marketing and media control. Third, wealthy people
tend to be wary of social protest movements, which may put an end to their
privileges. Their fear causes them to emphasize their preference for the
present (i.e. to overvalue the discount rate). They will increase the production
level of polluting activities in order to maximize their current results, thus
encouraging an increase of polluting emissions or a greater exploitation of
natural resources.
Scruggs (1998) contests these developments by claiming that Boyces
architecture is based entirely on the assumption that wealthy people systematically prefer a degraded environment.2 He contests this idea by recalling
that the literature in the eld suggests on the contrary that the quality of
the environment is a luxury good, the demand for which increases more
rapidly than income levels. A non-egalitarian society should then generate
less environmental deterioration.3 Referring to the new paradigm of social
modernization (Hofrichter and Reif 1990), Scruggs claims that there may be
a threshold of average individual wealth beyond which the direction of the
impact of inequality on pollutions is reversed. Boyces hypothesis is veried
in the case of the poorest countries but, in the most developed countries,
2 Note that this assertion needs to be carefully considered since Boyce explicitly disavows this claim. He
asserts instead that the willingness to support environmental public policies, expressed by wealthy
individuals, could be oset by other arguments in their utility functions. Moreover, this contradiction is
amplied when they are able to move away from polluted sites.
3 The role of an income elasticity of environmental quality exceeding the unit is not as obvious as Scruggs
claims. Indeed, even in this case, a wealthy consumer might be confronted with the necessity of comparing
the usefulness of protecting any ecosystem and the opportunity cost of renouncing the purchase of a
polluting good.

417

REVIEW OF SOCIAL ECONOMY

inequality would tend to favour the preservation of the environment. He

therefore concludes that the relation between inequality and ecological
deterioration cannot be a one-to-one relation but is undetermined. However,
Scruggs only considers the issue in terms of consumer wealth, while the
wealthiest classes are also those with the greatest interests in production
activities.
The various eects of inequality on environmental deterioration. The debate
between Boyce and Scruggs is indicative of the complexity of the relation
between inequality and the environment. This complexity is related to the
multitude of underlying mechanisms, which are often in conict.
On the one hand, some arguments highlight the harmful impact that a
reduction of inequality could have on ecosystems.
First of all, a progressive redistribution of wealth may tend to exacerbate
the scale eect of the EKC. Since the propensity to consume is a decreasing
function of income, a policy such as this tends to produce an increase of
consumption that is more than proportional to the reduction of consumption
among the wealthiest groups. Furthermore, the assets bought by middle-class
households may be of poorer quality, and may also be more polluting. Such
dynamics is especially relevant in transition countries, where the middle
classes are rapidly increasing.
Second, innovations in the realm of new manufacturing processes or the
diusion of less polluting goods require a sizeable market to meet an eective
demand. Since these outputs are expensive while they emerge, wealthy
households will promote the development of this market segment. Inequalities may then have a positive impact on environmental quality since they
provide the outlets for innovative assets.
On the other hand, social and power inequalities may serve to deteriorate the
environment through multiple channels.
The spatial pollution scale can be an important characteristic for relations
between inequality and the environment. As Boyce (2008) remarks, many
environmental costs are localized and are not uniformly distributed. The
more localized the eects of a pollutant are, the better able wealthy people
are to protect themselves against environmental deteriorations. In other
words, the negative impact of inequality is more pronounced in the case of
local pollutants. For example, the location of hazardous waste sites often
obeys the logic of land segregation (Gawande et al. 2000), which is a
consequence of social inequality (Benabou 1993). In this way, the relative
institutional under-representation of the interests of the poorest classes can
have an impact on the environment. The poorest categories are often those
418

IS INEQUALITY HARMFUL FOR THE ENVIRONMENT?

who are aected head-on by local pollutions. Therefore, they are the best
informed about ecological deterioration, especially where pollution aects
vital ecosystem services such as drinking water. When the representation of
the most vulnerable within public institutions is poor, their economic
interests are not properly defended and the resulting asymmetry is also
reected in their environmental interests. Since the wealthiest individuals
have a greater ability to protect themselves against local pollution (even
if this is an illusion), society may tend to underestimate environmental
deteriorations. For example, if a territory only has a limited access to safe
drinking water, the poorest will generally be the most severely aected by
water rationing. If the authorities fail to take account of the interests of the
poorest people, the construction of infrastructures designed to improve the
supply of drinking water may turn out to be thoroughly inadequate.
As explained by Bourguignon (2004), Easterly (2007) and Ravallion
(2007), inequality is a major cause of poverty and underdevelopment. This is
why inequality may also have an indirect impact on environmental
deterioration through its impact on poverty. The literature exploring the
connection between poverty and the environment often construes this
relation as a vicious circle (Barbier 2002). The idea is that poor farmers may
have no other choice but to make an excessive withdrawal of the natural
endowments of their ecosystems in order to draw a minimum income
(Mink 1993; Rozelle et al. 1997). In order to minimize the risk of protest
movements, public authorities may, if not positively encourage, at least fail
to constrain deforestation, resulting from the cultivation of new lands, and
the smuggling of protected species. As a result of these survival strategies, the
quality of environmental resources and crop yields may be reduced, thus
further impoverishing farmers.
Last, the ability of democratic congurations to take better account of the
interests of the most vulnerable is also often considered in the economic
literature. The general idea is that the interests of each social group are better
upheld in nations with free elections, by granting a vote to every agent. The
state ought therefore to take better care of the needs of the poorest, and
ecological problems need to be managed more eciently. Using a theoretical
model based on utilities, Eriksson and Persson (2003) show that the impact
of a more equal distribution of income on the environment depends on
the degree of democratic governance. In a full democracy, a decrease of
inequality reduces pollution, ceteris paribus, whereas the opposite occurs
under authoritarian regimes. However, since political systems vary widely,
the reactions of regulators to ecological conicts may dier signicantly
(Bernauer and Koubi 2009). The inuence capacities of interest groups are
419

REVIEW OF SOCIAL ECONOMY

heavily dependent on particular forms of governance (Lijphart 1999). The

scope of institutional settings, from the Westminster model to the
multiple-actor constellations, implies a whole range of veto positions
(Scharpf 2000; Tsebelis 1995). The ability to inuence environmental policy
thus ranges, respectively, from a broader to a narrower coalition. During the
negotiation processes designed to implement environmental reforms, the
requirement to include poorer categories of the population thus partly
depends on such congurations.

Empirical Findings
There is a fairly extensive empirical literature studying the relation between
the environment and inequalities. The present survey is restricted to the main
studies that specically address the Environmental Kuznets Curve and the
impact of inequality.
Torras and Boyce (1998) were the rst to provide an analysis of these
issues. Their aim was to demonstrate that inequalities interact with per capita
GDP levels in explaining pollution. More specically, their object was to test
the hypothesis according to which the eect of inequality on pollution diers
in low- and high-income countries. They estimated the equation that links
the pollution level to the level of per capita GDP and negotiating power. The
latter is approximated by the Gini index, the literacy rate and an indicator
measuring civil rights and political freedoms. The authors resort for the most
part to data drawn from the GEMS database for pollutant concentrations
throughout the 19771991 period in 1852 cities in 1942 countries
(depending on the type of pollution). In the rst instance, they estimated
the regressions without inequality variables. Their results are similar to those
outlined in Grossman and Krueger (1995) and conrm the EKC for most of
the pollutants. Second, they included inequality variables and found that the
statistical signicance of per capita GDP eects is reduced. Globally, an
increase of literacy rates in low-income countries tends to reduce pollution
levels. The authors observe the same result for the political rights index.
The Gini index has mixed eects according to the pollutant under analysis.
For SO2 and smoke, greater income inequality is associated with more
pollution in low-income countries. An increase of inequality also reduces the
percentage of the population with access to safe water in the poorest
countries. In other words, the weaker the per capita GDP level is, the more
likely inequality is to have a harmful impact on the quality of the
environment. Yet in the case of heavy particles and dissolved oxygen, they
420

IS INEQUALITY HARMFUL FOR THE ENVIRONMENT?

obtain opposite results: an increase of the Gini index in low-income countries

is associated with less pollution.
Similarly, Scruggs (1998) tests the equality hypothesis according to which a
decline of inequalities improves the environment. The observations used by
Scruggs are drawn from two distinct databases: (i) the United Nations
GEMS on water (dissolved oxygen and faeces) and air quality (SO2 and
particle concentrations); and (ii) OECD data for 17 industrial democracies
for which Scruggs constructs a composite indicator of emissions. Results
tend towards an indeterminacy of the impact of inequality on ecological
deteriorations. In the rst set of regressions, only the indicators of dissolved
oxygen and particles are signicantly correlated with the Gini index.
Furthermore, the expected sign is only observed with the rst indicator. In
the second set, the results are also ambiguous since the Gini index is not
signicant (except for a particular regression, and yet the sign tends towards
a positive impact of inequalities on environmental quality).
However, the majority of empirical studies in the eld tend to emphasize a
negative impact of inequality on environmental quality. Boyce et al. (1999)
provide some results concerning 50 US states in accordance with the equality
hypothesis. Gawande et al. (2000) study the relation between the location of
toxic waste sites and the income level of US households. They demonstrate
clearly that, behind the EKC, there lurks the nancial ability of wealthy
households to move away from sources of pollution. As they become
wealthier, individuals seek to move away from polluting sites rather than
trying to inuence public policies in favour of a signicant decrease of toxic
wastes. Mikkelson et al. (2007) conclude that inequality increases the number
of endangered species. They also nd a U-shaped curve with per capita GDP
that is an inverse EKC-type curve. Gates et al. (2002) underline a signicant
and indirect relation between social inequalities and the preservation of
ecosystems through their negative impact on political freedoms. Furthermore, inequalities also have a direct negative relation with the percentage of
land holding the status of protected natural park and with the quality of
available information concerning environmental conditions.
DATA
Many recent studies of the EKC tend to use panel data since these provide an
adequate framework for modelling heterogeneity across individuals and
time. However, panel data estimations imply two diculties. On the one
hand, some argue that panel data or cross-section estimates of EKC may be
inaccurate since they fail to capture the specic dynamics within each
421

REVIEW OF SOCIAL ECONOMY

country. The relationship between pollution and GDP in a specic country may
be unrelated to the relation observed with panel data estimations on account of
country-specic characteristics (De Bruyn et al. 1998). This is why Gergel et al.
(2004) recommend using long-term time-series rather than panel or crosssection data. However, one advantage of panel data estimations as opposed to
cross-country estimations is that they help to model heterogeneity across
countries and time. More precisely, a xed-eects approach avoids the
assumption of homogeneity across countries by estimating a separate intercept
for each country. It takes account therefore of a certain degree of heterogeneity,
which helps to reduce the problem of country-specic factors. On the other
hand, one drawback of panel data or time-series estimations is that their focus is
centred on year-to-year changes. We may assume therefore that year-to-year
variations in independent variables (per capita GDP, inequality or others)
induce an adjustment in pollution levels within the same year in which the
process occurs. But the relationship between wealth, inequality and environmental quality is a long-term issue, and adjustment processes relating to
pollution levels are clearly not instantaneous. According to Torras and Boyce
(1998), the use of cross-country estimations helps to focus strictly on longerterm determinants of inter-country variation concerning pollution levels by
eliminating short-term variations. But cross-country estimations assume
homogeneity among countries concerning the relationship between pollution
and inequality. In this paper, we propose to resolve this bias by estimating
dynamic panel data models that allow for a dynamic adjustment by integrating
the lag dependent variable as an explanatory variable (Halkos 2003).
Our sample includes 83 countries67 developing countries and 16
transition countries(Central and Eastern European Countries (CEEC)
and former Soviet republics) for which observations based on the 19882003
period are available. The per capita GDP observations are drawn from the
2007 World Development Indicators, and are expressed in 2000 constant
dollars and are Purchasing Power Parity (PPP)-adjusted.
Because there are no composite indicators of environmental quality,
two pollution variables are taken into account, with the requirement that
they refer exclusively to local pollutants. First, the data concerning sulphur
dioxide (SO2) emissions are drawn from the ASL database and its update
proposed by David Stern for the 1990s and 2000s (ASL and Associates 1997;
Stern 2005). These are expressed in kg per capita. Second, the observations
concerning organic water pollution are based on the 2007 World Development Indicators. These emissions are measured by the amount of oxygen
consumed by bacteria in water in breaking down industrial and domestic
waste (World Bank 2007: 149), and are expressed in kg per industrial worker.
422

IS INEQUALITY HARMFUL FOR THE ENVIRONMENT?

Inequality data based on the Gini index are drawn from the World Income
Inequality Database of the World Institute for Development Economics
Research (WIDER), a database that includes approximately 5,000 observations taken from multiple sources and ranked according to their quality.
Whenever possible, we chose to retain high-quality observations that are
homogeneous in terms of unit of measurement and covered population.
However, the inequality data raise two diculties. First, they raise an issue of
comparability since the household surveys used to estimate the distribution
of living standard are based on distinct sampling methods and the indicator
of living standards used here is not homogeneous across countries.4 Second,
the data concerning inequality are signicantly fragmentary, which accounts
for the poorly balanced panel. Indeed, out of 1,328 theoretical observations
(83 countries and 16 years), we only have 412 observations for the Gini
index.
As a proxy of power inequality, we use the political rights index of the
non-governmental organization Freedom House, which measures in particular the extent of political freedom according to four criteria: (i) the extent
of freedom in electoral processes, (ii) pluralism, (iii) citizen participation in
political life, and (iv) the practical methods of governance. The indicator
then grades countries based on the extent of political freedom, with grade 7
corresponding to a highly limited level of political rights and grade 1 to a
fully democratic regime.
ECONOMETRIC ANALYSIS
In the rst instance we discuss the pertinence of the EKC for SO2 emissions
and organic water pollution in developing and transition countries. Second,
we introduce potentially omitted variables, i.e. inequality and political
freedoms, in order to test the equality hypothesis.

Environmental Kuznets Curve

In order to test the validity of the EKC, we retain a three degree polynomial
form for the relationship between the level of pollution and per capita GDP.
Furthermore, because of the double dimension of the data (individual and
temporal), we resort to panel data models. First we estimate a xed-eects

4 For comparability problems, see Deininger and Squire (1996).

423

REVIEW OF SOCIAL ECONOMY

model (FEM) with both individual and temporal eects.5 The expression of
this model is given by:
POLit b0 b1 GDPhit b2 GDPh2it b3 GDPh3it ai lt eit
where POL represents the level of pollution and GDPh the GDP per capita.
The xed eects are constants to be estimated that are specic to countries
(ai) and years (lt). They indicate the inuence of non-observable
characteristicsrespectively time constants and constants between individuals. The xed eects model estimator is the least squares with dummy
variables estimator (LSDV), equivalent to the ordinary least squares (OLS)
applied to the model expressed as deviations from individual means. The
LSDV estimator can produce biased coecient estimates with small samples.
To address this problem, and following Halkos (2003), we use the dynamic
panel data model elaborated by Arellano and Bond (1991), which involves a
Generalized Method of Moments (GMM) estimation of a dependent
variable as a function of its lagged value and exogenous variables. The
expression of this dynamic model is thus given by:
POLit b0 b1 POLit1 b2 GDPhit b3 GDPh2it b4 GDPh3it ai lt eit
The ArellanoBond estimator consists of rst-dierencing this equation to
remove the individual eects (ai) before estimating the rst-dierence
equation by instrumental variables. More precisely, the rst-dierentiated
lag dependent variable is instrumented by the values of the dependent
variable lagged two or more periods. In this study we use only two lags of the
dependent variable as instruments since the number of observations is
limited, particularly when we introduce the Gini index. The choice of a
limited number of instruments is also informed by Roodman (2009), who
identies the risk entailed by instrument proliferation. The use of too many
instruments may generate results that are invalid and yet appear valid.
Furthermore, it could weaken the power of the Sargan/Hansen instrument
validity test. As a technique for reducing this bias, Roodman recommends
the use of only certain lags instead of all available lags for instruments.
Tables 1a and 1b present respectively the results for SO2 emissions and
organic water pollution. The dynamic models are well-specied since the
Sargan/Hansen tests always conrm the validity of instruments. We also
5 For an account of the technical issues related to these two models, see Baltagi (1995). The random-eects
model is less appropriate than the xed-eects model when the number of individuals is limited.

424

425

7,778

Turning point

0.0726

836

0.0011
(1.62)
6.09E08
(1.29)

2.8239
(1.30)

FEM

24.59
(0.4285)
70.30
(0.7641)

711

0.0016
(1.37)
2.40E08
(0.28)

70.1011
(70.04)
0.1841***
(3.61)

Dynamic

Developing countries

8,544

0.2545

121

0.0229***
(4.73)
71.34E06***
(75.57)

750.6337**
(72.28)

FEM

12.63
(0.987)
0.16
(0.8720)

107

0.0059
(1.58)
72.99E07
(71.57)

723.202
(71.42)
0.8598***
(16.94)

Dynamic

Transition countries

Figures in parentheses are t-ratios for regression coecients and signicance levels for the Sargan/Hansen and autocorrelation tests.
***statistically signicant at 1 percent level; **statistically signicant at 5 percent level; *statistically signicant at 10 percent level.

34.98
(0.068)*
1.30
(0.1945)

818

0.0019
(1.52)
71.60E07**
(72.24)

71.9382
(70.56)
0.8165***
(21.81)

0.0999

957

0.0091***
(9.27)
75.85E07***
(79.90)

710.6797***
(74.13)

Dynamic

R2 within
Sargan/Hansen
Test
Autocorrelation
order 2

GDPh2

GDPh

SO2 emissions
(t-1)

Constant

FEM

Global

Table 1a: Regression Results for the Determinants of SO2 Emissions, Fixed-eects Model (FEM) and Dynamic Panel Data Model

IS INEQUALITY HARMFUL FOR THE ENVIRONMENT?

426
0.84
(0.4024)

Autocorrelation
order 2

604

79.58E14***
(73.84)

73.17E05***
(75.56)
3.13E09***
(4.61)

0.2233***
(7.42)
0.2579**
(2.09)

25.27
(0.5035)

785
0.1663

72.40E13***
(78.67)

76.96E05***
(711.44)
7.38E09***
(9.92)

0.3545***
(27.21)

Dynamic

N
R2 within
Test Sargan/
Hansen

GDPh3

GDPh2

GDPh

Water pollution
(t-1)

Constant

FEM

Global

589
0.0138

75.60E14**
(72.52)

71.41E05***
(72.66)
1.67E09***
(2.67)

0.2364***
(21.50)

FEM

71.08
(0.2789)

32.90
(0.1649)

445

77.57E14**
(72.43)

72.64E05***
(73.31)
2.57E09***
(2.79)

0.2622***
(9.33)
0.0337
(0.34)

Dynamic

Developing countries

196
0.3719

76.21E13***
(77.13)

71.38E04***
(79.72)
1.64E08***
(8.27)

0.4894***
(15.59)

FEM

(continued )

1.18
(0.2369)

6.73
(0.998)

159

71.13E13*
(71.80)

73.32E05***
(73.07)
3.37E09**
(2.29)

0.1607***
(4.25)
0.5951***
(5.48)

Dynamic

Transition countries

Table 1b: Regression Results for the Determinants of Organic Water Pollution, Fixed-eects Model (FEM) and Dynamic Panel
Data Model

REVIEW OF SOCIAL ECONOMY

427

7,352
13,148

FEM

Global

8,008
13,773

Dynamic

6,082
13,799

FEM

7,879
14,754

Dynamic

Developing countries

6,954
10,652

FEM

8,998
10,884

Dynamic

Transition countries

Figures in parentheses are t-ratios for regression coecients and signicance levels for the Sargan/Hansen and autocorrelation tests.
***statistically signicant at 1 percent level; **statistically signicant at 5 percent level; *statistically signicant at 10 percent level.

Turning point
Min.
Max.

Table 1b: (Continued )

IS INEQUALITY HARMFUL FOR THE ENVIRONMENT?

REVIEW OF SOCIAL ECONOMY

systematically reject the hypothesis of second-order autocorrelation.

Regarding R2 within, the quality of the estimations is weaker for the xedeects models, particularly for SO2 emissions.6 It is important to note that
the Chow test implemented for the xed-eects model conrms the relevance
of the two sub-samples (developing and transition countries) for the two
pollutants.
For SO2 emissions, we exclude cubic term of GDP per capita from the
regressions on account of its non-signicance. For the xed-eects model, it
can be noted that the relationship between per capita GDP and SO2
emissions takes the shape of a U-inverted curve, in accordance with the
EKC. The turning point is relatively high (US$ 7,778) and corresponds more
or less to the average level of development over the given period in Chile and
Russia. The implementation of distinct estimations for developing and
transition countries shows that the relationship is not stable. The EKC
appears to be validated in the former socialist countries. The turning point is
around US$ 8,500roughly the mean per capita income over the period in
Croatia. The decreasing part of the EKC is undoubtedly indicative of the
decline of SO2 emissions observed in all transition countries in the considered
period, with the exception of Macedonia.7 For instance, the SO2 emissions
per capita decreased by 88 percent in the Czech Republic, by 70 percent in
Hungary and by 57 percent in Bulgaria (Stern 2005). In the case of
developing countries, the xed-eects model reveals an increasing linear
relationship between emissions and per capita GDP. However, this
relationship does not appear to be robust in so far as it is only signicant
at 10 percent level. In the case of the dynamic model, it appears that the EKC
observed for the entire sample and for transition countries loses its
signicance when the lag dependent variable is introduced as an explanatory
variable. The signicance of these lagged emissions indicates that the relation
between emissions and per capita GDP is fundamentally dynamic. In other
words, the adjustment of SO2 emissions in accordance with the level of
wealth is slow and the causes of this delayed adjustment probably lie in the
institutional rigidities of rms and industries (Halkos 2003).
The relation between organic water pollution and development is dierent
and appears to be stable. For the entire sample and for the two sub-samples,
the estimations indicate a signicant relation between water pollution and
per capita GDP, which takes the shape of an N-inverted curve that goes
6 The R2 within measures the proportion of the inter-individual variance of the dependent variable, which is
explained by explanatory variables.
7 For SO2 emissions, the group of transition countries is exclusively made up of CEEC, since there are no
available data for the former Soviet republics.

428

IS INEQUALITY HARMFUL FOR THE ENVIRONMENT?

against the grain of EKC predictions. For the entire sample, the minimum of
this relationship is observed for a per capita GDP situated between US$
7,000 and 8,000 (according to the model), which is close to the mean
development level of Malaysia, Chile and Russia over the considered period.
The maximum level corresponds to a per capita GDP situated between US$
13,000 and 14,000. The nal decreasing part of the relationship therefore has
a very limited signicance since only two countries within the sample (South
Korea and the Czech Republic) have a mean income above the maximum
level. The concept of a development level beyond which water pollution
decreases is plausible, but the threshold is so high that so far it has not been
reached by the majority of the countries included in our sample.
Finally, the nature of the relationship between environmental deterioration and GDP per capita is related to the specic pollutant in question and
the group of countries under study, but also to the econometric specication
that is adopted. Concerning SO2 emissions, the EKC is validated for
transition countries but not for developing countries. Furthermore, this
relationship is fundamentally dynamic because of adjustment delays of
emissions to per capita GDP variations. In the case of organic water
pollution, the EKC is never conrmed. In line with Gates et al. (2002) and He
et al. (2007), we argue that the relationship between pollution and
development depends on factors related to the social and political situation
of the country in question.

Pollution, Inequality and Political Rights

We propose to test the assumption according to which the relationship
between pollution and per capita GDP cannot be understood without taking
account of social and political factors. First of all we integrate the degree of
income inequality (measured by the Gini index) and the extent of power
inequality (measured by the political rights index). The equations for the
xed-eects model and the dynamic model are given by:
POLit b0 b1 GDPhit b2 GDPh2it b3 GDPh3it b4 GINIit b5 POLITit
ai lt eit
POLit b0 b1 POLit1 b2 GDPhit b3 GDPh2it b4 GDPh3it b5 GINIit
b6 POLITit ai lt eit
Second, in order to test the interaction between income inequality and
political freedoms, we take account of a dierentiated eect of the Gini
429

REVIEW OF SOCIAL ECONOMY

index, depending on whether the country is a democratic (political rights

index from 1 to 3) or authoritarian regime (political rights index above 3).
The two models can be expressed as:
POLit b0 b1 GDPhit b2 GDPh2it b3 GDPh3it b4 GINI  DEMit
b5 GINI  DICit ui vt eit
POLit b0 b1 POLit1 b2 GDPhit b3 GDPh2it b4 GDPh3it
b5 GINI  DEMit b6 GINI  DICit ui vt eit
We present the estimations of the xed-eects models and the dynamic
panel data models, respectively for SO2 emissions (Tables 2a and 2b) and
water pollution (Tables 3a and 3b). In all these tables, models (1) reestimate the relationship between pollution and per capita GDP without
inequality variables by taking account of the decrease of observations
implied by the introduction of the Gini index in regressions. Our aim is
to analyse the sensitivity of previous results to the reduction of the
sample size.
SO2 emissions. It appears that decreasing the sample size does not modify the
nature of the relationship between SO2 emissions and per capita GDP.
Concerning xed-eects models, the EKC is still conrmed for the entire
sample and for transition countries. Compared with previous estimations, we
note a slight reduction of turning points for the entire sample and a more
pronounced decrease for transition countries. In the dynamic models, the
polynomial terms of per capita GDP are still not signicant, unlike the lag
dependent variable, which captures the dynamic adjustment of emissions. In
the case of the impact of inequality variables, a rst result concerns the nonsignicance of the Gini index for all models and samples. In other words, SO2
emissions appear not to be inuenced by income inequality, contrary to
Boyces equality hypothesis. Nonetheless, the coecient for the political
rights index for the entire sample is signicant at 1 percent and positive in
the xed-eects estimations (model 2). An improvement of political freedoms
(i.e. a decrease of the political rights index) therefore has a downward
inuence on emissions, ceteris paribus. The same eect is also observed for
transition countries. From our point of view, this result is coherent with
the specic political context of the countries under analysis. The increase of
political rights related to the rise of democratic regimes in most of the CEEC,
as well as the prospect of joining the European Union, has tended to favour
the emergence of environmental matters that had been totally ignored in the
former socialist regimes.
430

431

7,254

Turning

7,340

0.2958

307
7,142

0.2738

307

(70.68)

70.0885

(70.64)

70.0828

(78.02)

77.77E07***

(6.22)

0.0111***

(71.25)

79.403

(3)

0.0846

228

0.0863

228

(0.54)

0.2015

(0.06)

0.0055

(0.15)

(0.21)

(1.01)
1.88E08

(0.95)
2.63E08

0.0018

(70.04)

0.0016

70.2851

(0.24)

(2)

1.0822

(1)

0.0894

228

(70.04)

70.0041

(0.18)

0.0167

(0.23)

2.83E08

(0.89)

0.0015

(0.17)

1.0412

(3)

Developing countries

7,380

0.3504

82

(73.87)

71.05E06***

(2.71)

0.0155***

(70.41)

711.4439

(1)

6,678

0.5039

79

(2.79)

3.8477***

(0.79)

0.397

(74.08)

78.76E07***

(2.54)

0.0117**

(70.61)

714.4905

(2)

Transition countries

Figures in parentheses are t-ratios for regression coecients.

***statistically signicant at 1 percent level; **statistically signicant at 5 percent level; *statistically signicant at 10 percent level.

point

0.2406

310

(2.69)

1.2589***

(70.30)

70.0389

(78.36)

(77.53)

(6.60)

77.97E07***

(5.89)

78.34E07***

0.0117***

(72.17)

0.0121***

717.1758**

(72.20)

(2)

715.2826**

R2 within

dictature

Gini_

democracy

Gini_

freedoms

Political

Gini

GDPh2

GDPh

Constant

(1)

Whole sample

Table 2a: Regression Results for the Determinants of SO2 Emissions, Fixed-eects Model

7,142

0.4495

79

(70.52)

70.2535

(70.76)

70.3405

(74.16)

79.38E07***

(2.78)

0.0134***

(0.19)

4.4564

(3)
IS INEQUALITY HARMFUL FOR THE ENVIRONMENT?

432

112

(70.76)

110

(1.50)

1.7725

43

43

(70.89)

(70.63)
110

70.1303

(70.73)

(70.28)
70.1609

70.0948

(1.35)

2.53E07

(72.15)

70.0079**

(71.75)

70.1982*

(3.35)

43.5433***

(3)

70.0670

43

(1.40)

1.1232

(70.13)

(0.63)

1.26E07

(0.04)

(0.27)

3.04E08

(71.44)

70.0056

(71.25)

70.1514

(1.94)

28.4686*

(2)

70.0175

(70.97)

71.92E07

(70.24)

70.0005

(6.20)

0.6778***

(0.37)

3.4655

(1)

0.0109

(71.33)

72.60E07

(70.14)

70.0005

(5.12)

0.4582***

(1.44)

23.4716

(3)

Developing countries

69

(70.63)

71.54E07

(0.20)

0.0009

(6.43)

0.7743***

(0.48)

11.0690

(1)

67

(0.72)

1.3083

(70.04)

70.0199

(71.59)

73.75E07

(0.62)

0.0030

(3.80)

0.4597***

(0.77)

19.6511

(2)

Transition countries

Figures in parentheses are t-ratios for regression coecients.

Sargan/Hansen tests never reject the validity of the instruments. Second order autocorrelation of residuals is always rejected.
***statistically signicant at 1 percent level; **statistically signicant at 5 percent level; *statistically signicant at 10 percent level.

Gini_dictature

Gini_democracy

freedoms

Political

Gini

71.62E07

(0.26)

(0.30)

GDPh2

0.0010

0.0012

(4.47)

(7.62)

(t-1)

0.4203***

(0.49)

(0.35)

0.7731***

8.2683

6.2962

(2)

GDPh

SO2 emissions

Constant

(1)

Whole sample

Table 2b: Regression Results for the Determinants of SO2 Emissions, Dynamic Panel Data Model

67

(70.15)

70.0645

(0.28)

0.1223

(71.12)

72.69E07

(0.10)

0.0004

(4.44)

0.4923***

(1.26)

31.9257

(3)

REVIEW OF SOCIAL ECONOMY

433

dictature

Gini_

democracy

Gini_

freedoms

Political

Gini

GDPh3

GDPh2

GDPh

Constant

(8.30)

(8.29)

0.3985***

(3)

(9.23)

0.2270***

(1)

(4.75)

(74.54)
(4.74)

9.90E09***

(71.56)
(2.11)

2.86E09**

(11.11)

0.6540***

(1)

(7.57)

0.7896***

(2)

(7.53)

0.7753***

(3)

(71.65)
(72.15)

2.93E09**

(71.66)
(72.12)

2.89E09**

(78.38)
(7.88)

2.24E08***

(75.92)
(5.98)

2.52E08***

(75.91)
(5.96)

2.50E08***

(77.83)

(70.55)

70.001

(71.69)

70.008*

(71.47)

70.0007

(70.54)

70.0006

70.86

0.0003

70.91

0.0003

(75.99)

(70.58)

70.0023

(73.11)

(77.37)

70.89

(72.23)

(71.71)

(72.26)

70.0030***

(72.25)
0.0003

(74.85)

70.0008*

(74.87)

(continued )

(73.27)

70.0030***

(73.01)

70.0027***

(75.97)

75.42E13*** 73.79E13*** 73.78E13*** 71.13E13** 71.14E13** 71.13E13** 78.25E13*** 79.34E13*** 79.29E13***

(8.25)

(74.55)

9.93E09***

(78.59)

1.49E08***

(77.49)

0.2143***

(3)

Transition countries

71.86E05* 71.81E05* 71.94E04*** 72.13E04*** 72.12E04***

(77.53)

0.2181***

(2)

Developing countries

71.27E04*** 78.01E05*** 77.98E05*** 71.74E05

0.4054***

(13.90)

(2)

0.4836***

(1)

Whole sample

Table 3a: Regression Results for the Determinants of Organic Water Pollution, Fixed-eects Model

IS INEQUALITY HARMFUL FOR THE ENVIRONMENT?

434

259

11,147

6,320

0.1289

254

(2)

Whole sample

11,148

6,312

0.1299

254

(3)

0.0874

160

(1)

12,928

4,207

0.0958

160

(2)

Developing countries

12,916

4,134

0.0948

160

(3)

10,929

7,172

0.4813

99

(1)

11,200

6,787

0.3696

94

(2)

Transition countries

Figures in parentheses are t-ratios for regression coecients.

***statistically signicant at 1 percent level; **statistically signicant at 5 percent level; *statistically signicant at 10 percent level.

6,742

11,586

Max.

0.2881

Min.

Turning Point

R2 within

(1)

Table 3a: (Continued )

11,067

6,873

0.3736

94

(3)

REVIEW OF SOCIAL ECONOMY

435

dictature

Gini_

democracy

Gini_

freedoms

Political

Gini

GDPh3

GDPh2

GDPh

pollution (t-1)

Water

Constant

(1.02)

(0.99)

0.2133

(4.33)

0.4252***

(3)

(2.85)

(2.05)

0.5628**

(1.00)

1.2313***

0.1003

0.037

(2)

(0.27)

(1)

(3)

(2.04)

0.5847**

(0.64)

0.0676

Developing countries

(72.92)

(70.84)
(0.93)

4.53E09

(70.85)
(1.01)

3.32E09

(70.71)

(70.94)

70.0006

(70.75)

70.0004

(71.04)

(70.34)

70.0006

(1.62)

(70.94)

(70.82)

(72.61)
0.0009

70.0019

(70.55)
(0.74)

2.53E09

(2.85)

1.45E08***

(72.75)

70.0001***

(0.71)

0.1379

(3.34)

0.5006***

(1)

(2.94)

1.99E08***

(72.96)

70.0001***

(0.80)

0.1446

(3.75)

0.6039***

(2)

Transition countries

(2.49)

1.84E08**

(72.65)

70.0001***

(0.75)

0.1905

(3.22)

0.5777***

(3)

(1.98)

0.0011**

(1.84)

0.0010*

(70.81)

(73.00)

(0.19)

0.0007

(70.41)

70.0003

(73.00)

(continued )

(70.59)

70.0005

(70.53)

70.0003

(72.44)

73.16E13*** 71.51E13 71.12E13 78.85E14 75.42E13*** 77.32E13*** 76.76E13**

(2.71)

9.53E09***

70.0005

(72.46)

(71.56)

(2.52)

73.05E13**

72.09E13

(1.53)

(72.69)

9.13E09**

5.97E09

(71.62)

75.87E05 78.97E05*** 79.45E05*** 73.88E05 72.70E05 71.84E05

(0.50)

0.1957

(4.26)

0.1066

0.4191***

(2.99)

(2)

0.3398***

(1)

Whole sample

Table 3b: Regression Results for the Determinants of Organic Water Pollution, Dynamic Panel Data Model

IS INEQUALITY HARMFUL FOR THE ENVIRONMENT?

436

11215

8741

93

(2)

Whole sample

11225

8881

93

(3)

41

(1)

41

(2)

Developing countries

41

(3)

9813

8022

54

(1)

10620

7504

52

(2)

Transition countries

Figures in parentheses are t-ratios for regression coecients.

Sargan/Hansen tests never reject the validity of the instruments. Second order autocorrelation of residuals is always rejected.
***statistically signicant at 1 percent level; **statistically signicant at 5 percent level; *statistically signicant at 10 percent level.

Max.

95

Min.

Turning point

(1)

Table 3b: (Continued )

10467

7679

52

(3)

REVIEW OF SOCIAL ECONOMY

IS INEQUALITY HARMFUL FOR THE ENVIRONMENT?

Organic water pollution. When referring to Tables 3a and 3b, the reduction of
the number of observations partly modies the results on the relationship
between water pollution and per capita GDP. With GMM estimations, the
N-inverted relationship displayed by our previous estimations is no longer
observed for the entire sample (model 1) and for developing countries
(models 1 to 3). When this relationship is still observed, the turning points
are generally weaker. For the entire sample, the maximum of the N-inverted
relationship is reached for a per capita GDP of around US$ 11,000 with
xed-eects estimations. The nal decreasing part thus has more signicance
since four countries (South Korea, Argentina, the Czech Republic and
Hungary) rather than two present higher mean per capita incomes over the
19882003 period.
The impact of inequality variables is clearly context-specic in so far as it
depends on the specic group of countries under consideration. Developing
countries, especially Latin American and sub-Saharan African countries,
experienced the highest levels of water pollution (Table 4). Yet for these
countries the xed-models are not well-specied in so far as the R2 within are
systematically inferior to 0.10. However, for the GMM estimations, we may
note a signicant and positive eect of the two interaction terms (model 3).
Despite the low number of observations, this result has two important
implications. First of all, it conrms that the relation between inequality and
environmental quality is more accurate for localized pollutants than for more
global pollutants such as air pollutants. Second, the signicance of these two
interaction terms indicates that the inuence of inequality on organic water
pollution is constrained by the political context. To some extent, these
estimations highlight an indirect eect by which a high level of wealth
inequality has an adverse eect on water pollution since it contributes to the
deterioration of political rights (a proxy of power inequality). This result
validates Boyces analysis, which relies on the combination of wealth
inequality and power inequality for explaining pollution levels. Therefore, if
it is assumed that poor people are the most severely aected by water
pollution, in a context of strong inequality and constrained political
freedoms, these people are unlikely to be able to assert their interest in the
preservation of water quality. Nevertheless, the impact of inequality is
signicant in both democratic and authoritarian regimes, which indicates
that the impact of a more equal income distribution on water quality does
not depend on the degree of democratic rule, contrary to the view defended
by Eriksson and Persson (2003).
The impact of income inequality on water pollution in transition countries
is markedly dierent since the coecient on the Gini index is negative and
437

REVIEW OF SOCIAL ECONOMY

Table 4: Mean Values of Dependant and Independent Variables (19882003)

SO2
emissions1

Water
pollution2

GDP per
cap.3

Gini

Politics4

Asia

4.6120

0.1620

3,614.9

0.375

4.26

Bangladesh
Cambodia
China
India

0.5318
1.1787
8.0655
2.8263

0.1585
0.1497
0.1381
0.1967

1,373.2
1,576.3
2,937.1
2,017.6

0.306
0.463
0.368
0.309

2.94
6.00
6.94
2.5

Indonesia
Korea. Rep
Lao
Malaysia

1.8261

0.5027
6.1847

0.1800
0.1231

0.1216

2,737.5
13,380.0
1,286.1
7,286.6

0.333
0.335
0.340
0.479

5.31
2.00
6.75
4.63

Mongolia
Pakistan
Philippines
Sri Lanka

19.3226
3.6925
3.7988
1.2155

0.185
0.1791
0.1889
0.1805

1,440.4
1,778.9
3,795.0
2,930.4

0.321
0.377
0.440
0.349

2.81
4.38
2.31
3.44

9.1758
1.1049
7.0720

0.1744

0.1890

5,799.5
1,633.6
4,232.6

0.437
0.362
0.391

2.69
6.94
5.16

Thailand
Viet Nam
Middle East
and North Africa
Algeria

5.1882

0.243

5,262.2

0.377

5.69

Egypt
Iran
Jordan
Morocco

4.6415
9.6123
12.4528
4.5258

0.1918
0.1587
0.1817
0.1703

3,121.1
5,363.9
4,060.1
3,487.4

0.330
0.432
0.395
0.393

5.69
5.94
4.44
4.88

Tunisia
Turkey
Yemen. Rep
Sub-saharan

12.3346
6.3578
1.4648
5.9740

0.1514
0.1772
0.2526
0.2340

5,456.3
5,908.4
768.8
1,962.3

0.406
0.417
0.364
0.456

5.81
3.44
5.38
4.76

Africa
Burkina Faso
Burundi
Cameroon

1.4720
0.5079
2.0825

0.2154
0.2423
0.2321

955.2
763.9
1,905.4

0.457
0.376
0.457

5.00
6.44
6.37
(continued )

438

IS INEQUALITY HARMFUL FOR THE ENVIRONMENT?

Table 4: (Continued )

SO2
emissions1

Water
pollution2

GDP per
cap.3

Gini

Politics4

Cote dIvoire
Djibouti

1.6541
3.0317

0.2238

1,600.5
2,173.1

0.398
0.447

5.94
5.19

Ethiopia
Ghana
Guinea
Kenya

1.2045
0.9208
1.8508
1.3010

0.2211
0.1737

0.2364

782.5
1,785.0
1,869.5
1,060.7

0.405
0.354
0.529
0.477

5.31
3.94
6.13
5.63

Lesotho
Madagascar
Malawi
Mali

1.4830
0.7932
2.6503

0.1699
0.2706
0.2803

2,409.2
846.7
542.3
745.0

0.606
0.458
0.557
0.453

4.31
2.88
4.13
3.19

Mauritania
Mauritius
Mozambique
Niger

4.8120
3.5068
2.8735
1.5874

0.1574
0.2762
0.3038

1,882.9
8,197.6
717.2
730.8

0.425
0.379
0.435
0.427

6.25
1.25
4.13
5.06

Nigeria
Senegal
South Africa
Swaziland
Tanzania

3.5067
2.0745
40.4940

1.8430

0.1905
0.3240
0.1767
0.2647
0.2518

844.1
1,375.7
8,842.6
4,109.1
514.4

0.469
0.456
0.579
0.555
0.342

5.44
3.56
2.63
6.00
5.13

Uganda
Zambia
Zimbabwe
Latin America

1.0010
51.8547
7.3978
11.5850

0.2588
0.2296
0.1994
0.2310

1,003.2
850.1
2,576.9
5,563.2

0.473
0.516
0.531
0.514

5.31
4.31
5.50
2.49

Argentina
Bolivia
Brazil
Chile

5.3485
4.9876
6.5807
91.9979

0.2126
0.2377
0.1941
0.2316

11,045.2
2,238.8
6,860.8
7,777.5

0.490
0.601
0.591
0.550

1.94
1.75
2.38
2.31

Colombia
Costa Rica

2.9077
2.8036

0.1971
0.2118

5,888.3
7,267.0

0.559
0.483

3.25
1.00
(continued )

439

REVIEW OF SOCIAL ECONOMY

Table 4: (Continued )

SO2
emissions1

Water
pollution2

GDP per
cap.3

Gini

Politics4

Dominican
Republic

5.2976

5,425.8

0.501

2.38

Ecuador
El Salvador
Guatemala
Honduras

6.0418
2.6117
2.1353
2.9587

0.2526
0.1952
0.2699
0.2151

3,325.9
4,195.2
3,731.1
2,841.1

0.582
0.510
0.563
0.553

2.31
2.56
3.38
2.56

Jamaica
Mexico
Nicaragua
Panama

18.4621
13.2596
3.7350
6.6014

0.2889
0.1944

0.2912

3,517.2
8,251.8
2,873.0
5,373.7

0.415
0.525
0.463
0.566

2.00
3.25
3.44
2.69

Paraguay
Peru
Trinidad
and Tobago

2.0081
15.5098
13.9399

0.2757
0.2014
0.2553

4,381.8
4,423.0
8,036.0

0.548
0.486
0.407

3.88
3.63
1.44

Uruguay
Venezuela
Transition
countries
Albania

10.3873
13.8790
33.6450

0.2477
0.2075
0.1700

8,031.3
5,879.8
6,611.1

0.436
0.461
0.298

1.25
2.37
3.14

5.9074

0.1955

3,113.9

0.289

4.13

Armenia
Azerbaijan
Bulgaria
Croatia

85.5807
11.4495

0.2064
0.1562
0.1461
0.1617

2,318.2
2,787.7
6,200.7
8,643.9

0.381
0.362
0.329
0.257

4.08
5.85
2.50
3.31

Czech Republic
Hungary
Kyrgyz Republic
Lithuania

52.0943
35.5842

0.1328
0.1597
0.1622
0.1677

14,493.8
11,599.3
1,712.8
8,754.3

0.221
0.238
0.381
0.313

1.00
1.63
4.92
1.15

Macedonia
Moldova
Poland

25.7148

32.7720

0.1714
0.3139
0.1580

5,833.4
2,018.6
8,918.5

0.354
0.336
0.311

3.50
3.31
1.75
(continued )

440

IS INEQUALITY HARMFUL FOR THE ENVIRONMENT?

Table 4: (Continued )

SO2
emissions1

Water
pollution2

GDP per
cap.3

Gini

Politics4

Romania
Russian Federation

22.7584

0.1004
0.1683

6,297.9
7,659.4

0.289
0.400

3.56
4.19

Slovak Republic
Ukraine
Whole sample

27.9719

11.0260

0.1409
0.1558
0.1990

10,456.0
5,717.9
4,201.0

0.249
0.282
0.410

1.64
3.44
3.87

Notes: (1) kg per capita; (2) kg per worker; (3) constant US$ 2,000, PPP; (4) the political
freedoms index grades countries according to the extent of their political freedom, grade 7
corresponding to a very restrained level of political rights and grade 1 to a democratic regime.

signicant at 5 percent level. Therefore, an increase of inequality causes a

reduction of water pollution, ceteris paribus, which invalidates Boyces
equality hypothesis. The impact of income inequality appears not to be
constrained by the extent of political freedom, whereas the same variable was
crucial in explaining SO2 emissions. Yet, when calculating a simple linear
Pearson correlation coecient, a positive and signicant correlation between
the Gini index and water pollution is observed. In other words, a high degree
of inequality would be associated with an important level of water pollution.
The nature of the relationship between water pollution and income inequality
in transition countries is actually modied if one takes account of the level of
wealth (GDP per capita). Once controlled by the level of wealth, an unequal
distribution of wealth tends to cause a reduction of water pollution.
CONCLUSION
The aim of this paper was to examine the potential interactions between the
social and environmental dimensions of sustainability. We examined the role
of wealth inequality in the pollution process. Our view is that one of the
limitations of EKCs investigations concerns the omission of explanatory
variables, among which social and power inequalities play a key role. Boyce
(1994, 2007, 2008) claims that income inequalities aect the environment
since they tend to reinforce power inequalities (to the benet of the wealthiest
people).
441

REVIEW OF SOCIAL ECONOMY

In order to test the validity of Boyces hypothesis, we ran econometric

analyses with panel data for 83 transition and developing countries over the
period 19882003. Four conclusions can be drawn from these investigations:
1.

2.

3.

4.

Generally speaking, the EKC hypothesis is conrmed for SO2 emissions,

unlike water pollution. In the case of water pollution, our estimations
highlight an N-inverted relationship even if the nal decreasing part
corresponds to very high per capita incomes.
As noted by Halkos (2003), the econometric technique adopted is
crucial in the identication of the relationship between per capita
GDP and pollution. We estimated both xed-eects and dynamic models
and these two specications display quite dierent results. Whereas the
EKC is validated for SO2 emissions with the xed-eects model, it
loses its signicance when a dynamic term with GMM estimations is
introduced. The lag dependent variable is highly signicant and indicates
that the adjustment of SO2 emissions to the level of per capita GDP is
slow. The importance of these dynamic adjustments may cause future
research on EKC to use large-scale dynamic models with panel or timeseries data.
The impact of income inequality on the quality of the environment
depends both on the context and the specic pollutants that are analysed.
The Gini index has no eect on SO2 emissions. Nevertheless, it is crucial
in explaining water pollution. Its eect is uncertain in transition
countries, whereas an increase in inequality is a factor of water pollution
in developing countries.
As mentioned by Barrett and Graddy (2000), political freedoms (a proxy
of power inequality) appear to be important in determining pollution
levels. Our estimations show that the improvement of the political
context throughout the 1990s in CEEC contributed to the decline of
SO2 emissions. Furthermore, the positive impact of the Gini index on
water pollution in developing countries is constrained by political rights.
This result is indicative of an indirect eect by which a high degree of
income inequality reinforces water pollution by causing a deterioration
of political freedoms.

The role of the combination of wealth and power inequalities in explaining

water pollution in developing countries has two implications. On the one
hand, it corroborates the idea that the impact of inequalities on the
environment is more pronounced in the case of local pollutants than more
global pollutants (such as SO2 emissions). On the other hand, it reveals the
442

IS INEQUALITY HARMFUL FOR THE ENVIRONMENT?

importance of the representation of dierent socioeconomic groups in public

institutions in order to promote environmental quality. The poorest groups
are often those who are the most severely aected by local pollution. When
the representation of these categories within public institutions is decient,
their environmental interests are unlikely to be adequately upheld. As a
consequence, public policies aimed at improving local environmental
resources are not necessarily implemented.
In short, the main task for sustainable development is to give priority to a
fair distribution of a reasonable amount of material wealth, the scale of
which needs to be strictly constrained.8 In northern countries, a signicant
proportion of individuals are still poor even though consumption already
exceeds sustainable levels. Within the framework of this paper, which was
limited to southern and transition countries, this statement demonstrates the
inner limits of current development in the north, a development process that
cannot be reproduced identically from a quantitative and material point of
view. This statement implies that we need to favour global public policies
aimed at reducing inequalities in order to minimize the social need for
economic growth.

REFERENCES
Arellano, M. and Bond, S. (1991) Some Tests of Specication for Panel Data: Monte
Carlo Evidence and an Application to Employment Equations, Review of Economic
Studies 58(2): 277297.
Arrow, K., Bolin, B., Costanza, R., Dasgupta, P., Folke, C., Holling, C. S., Jansson, B.
O., Levin, S., Maler, K. G., Perrings, C. and Pimentel, D. (1995) Economic Growth,
Carrying Capacity and the Environment, Science 268: 520521.
ASL and Associates (1997) Sulfur Emissions by Country and Year, Washington, DC:
US Department of Energy, Report no. DE96014790.
Baltagi, B. H. (1995) Econometric Analysis of Panel Data, Chichester: John Wiley & Sons.
Barbier, E. B. (2002) Development, Poverty and Environment, in J. van der Bergh (ed.)
Handbook of Environmental and Resource Economics, Cheltenham: Edward Elgar
Publishing.
Barrett, S. and Graddy, K. (2000) Freedom, Growth and the Environment, Environment
and Development Economics 5(4): 433456.
Benabou, R. (1993) Workings of a City: Location, Education and Production, The
Quarterly Journal of Economics 108(3): 619652.
Bernauer, T. and Koubi, V. (2009) Eects of Political Institutions on Air Quality,
Ecological Economics 68(5): 13551365.
8 The technological progress can help to bring about a slight reduction of the ecological constraint, although
it can in no way help to avoid it.

443

REVIEW OF SOCIAL ECONOMY

Bourguignon, F. (2004) The Poverty-Growth-Inequality Triangle, Paper prepared for

the Indian Council for Research on International Economic Relations, New Delhi.
Boyce, J. K. (1994) Inequality as a Cause of Environmental Degradation, Ecological
Economics 11(3): 169178.
Boyce, J. K. (2007) Inequality and Environmental Protection, in J. M. Baland, P.
Bardhan and S. Bowles (eds) Inequality, Cooperation and Environmental Sustainability,
Princeton, NJ: Princeton University Press, pp. 314348.
Boyce, J. K. (2008) Is Inequality Bad for the Environment?, Research in Social Problems
15: 267288.
Boyce, J. K., Klemer, A. R., Templet, P. H. and Willis, C. E. (1999) Power Distribution,
the Environment and Public Health: A State-level Analysis, Ecological Economics
29(1): 127140.
Dales, J. H. (1968) Pollution, Property and Prices, an Essay in Policy Making and
Economics, Toronto: University of Toronto Press.
De Bruyn, S. M., van den Bergh, J. C. J. M. and Opschoor, J. B. (1998) Economic
Growth and Emissions: Reconsidering the Empirical Basis of Environmental Kuznets
Curve, Ecological Economics 25(2): 161175.
Deininger, K. and Squire, L. (1996) Measuring Income Inequality: A New Data-base,
World Bank Economic Review 10(3): 565591.
Easterly, W. (2007) Inequality does Cause Underdevelopment: Insights from a New
Instrument, Journal of Development Economics 84(2): 755776.
Eriksson, C. and Persson, J. (2003) Economic Growth, Inequality, Democratization and
the Environment, Environmental and Resource Economics 25(1): 116.
Gates, S., Gleditsch, N. P. and Neumayer, E. (2002) Environmental Commitment,
Democracy and Inequality, a Background Paper to World Development Report 2003,
Washington, DC: World Bank.
Gawande, K., Bohara, A. K., Berrens, R. P. and Wang, P. (2000) Internal Migration and
the Environmental Kuznets Curve for US Hazardous Waste Sites, Ecological
Economics 33(1): 151166.
Gergel, S. E., Bennett, E. M., Greeneld, B. K., King, S., Overdevest, C.A. and Stumborg,
B. (2004) A Test of the Environmental Kuznets Curve using Long-term Watershed
Inputs, Ecological Applications 14(2): 555570.
Grimes, P. and Roberts, J. (1997) Carbon Intensity and economic Development 1962
1991: A Brief Exploration of the EKC, World Development 25(2): 191198.
Grossman, G. M. and Krueger, A. B. (1995) Economic Growth and the Environment,
The Quarterly Journal of Economics 110(2): 353377.
Grossman, G. M. and Krueger, A. B. (1996) The Inverted-U: What does it Mean?,
Environment and Development Economics 1(1): 119122.
Halkos, G. E. (2003) Environmental Kuznets Curve for Sulfur: Evidence using GMM
Estimation and Random Coecient Panel Data Models, Environment and Development Economics 8(4): 581601.
He, J., Makdissi, P. and Wodon, Q. (2007) Corruption, Inequality and Environmental
Regulation, Cahiers de Recherche de lUniversite de Sherbrooke, no. 07-13.
Hofrichter, J. and Reif, K. (1990) Evolution of Environmental Attitudes in the European
Community, Scandinavian Political Studies 13(2): 119146.

444

IS INEQUALITY HARMFUL FOR THE ENVIRONMENT?

Lijphart, A. (1999) Patterns of Democracy: Government Forms and Performance in Thirtysix Countries, New Haven, CT: Yale University Press.
Mani, M. and Wheeler, D. (1998) In Search of Pollution Havens? Dirty Industry in the
World Economy, 19601995, Journal of Environment and Development 7(3): 215247.
Mikkelson, G. M., Gonzalez, A. and Peterson, G. D. (2007) Economic Inequality
Predicts Biodiversity Loss, Plos One 2(5): 15.
Mink, S. D. (1993) Poverty, Population and the Environment, World Bank Discussion
Paper, no. 189, Washington, DC: World Bank.
Ostrom, E. (1990) Governing the Commons, The Evolution of Institutions for Collective
Action, Cambridge: Cambridge University Press.
Ravallion, M. (2007) Inequality is Bad for the Poor, in J. Micklewright and S. Jenkins
(eds) Inequality and Poverty Re-examined, Oxford: Oxford University Press.
Rock, M. (1996) Pollution Intensity of GDP and Trade Policy: can the World Bank be
Wrong?, World Development 24(3): 471479.
Roodman, D. (2009) A Note on the Theme of Too Many Instruments, Oxford Bulletin
of Economic and Statistics 71(1): 135158.
Rozelle, S., Huang, J. and Zhang, L. (1997) Poverty, Population and Environmental
Degradation in China, Food Policy 22(3): 229251.
Scharpf, W. (2000) Institutions in Comparative Policy Research, Comparative Political
Studies 33(6/7): 762790.
Scruggs, L. A. (1998) Political and Economic Inequality and the Environment,
Ecological Economics 26(3): 259275.
Selden, T. and Song, D. (1994) Environmental Quality and Development: is there a
Kuznets Curve for Air Pollution Emissions?, Journal of Environmental Economics and
Management 27(2): 147162.
Stern, D. I. (2005) Global Sulfur Emissions from 1850 to 2000, Chemosphere 58(2): 163
175.
Torras, M. and Boyce, J. K. (1998) Income, Inequality and Pollution: A Reassessment of
the Environmental Kuznets Curve, Ecological Economics 25(2): 147160.
Tsebelis, G. (1995) Decision Making in Political Systems: Veto Players in Presidentialism,
Parliamentarism, Multicameralism and Multipartyism, British Journal of Political
Science 25(3): 289325.
WCED (1987) Our Common Future, Oxford: Oxford University Press.
World Bank (1992) World Development Report 1992. Development and the Environment,
Washington, DC: World Bank.
World Bank (2007) World Development Indicators 2007, Washington, DC: World Bank.

445

Copyright of Review of Social Economy is the property of Routledge and its content may not be copied or
emailed to multiple sites or posted to a listserv without the copyright holder's express written permission.
However, users may print, download, or email articles for individual use.