The Potential Relationship Between Income Inequality and Environmental Quality in Iran: The Panel Quantile Regression Approach

Abstract

This paper addresses the relationship between income inequality and environmental quality in the agriculture sector as the most related sector to the environment. In this context, we used a panel data set for 28 provinces of Iran during 2003-2017 and implemented panel quantile regression. To choose the best econometric specification the Taylor diagram is used. To explore whether the effect on income inequality on CO2 emission is different for rich and poor provinces, we consider the GINI × GDP interaction term in the model. Results confirmed that EKC in the agriculture sector of Iran, and a major and significant effect of energy consumption on CO2 emission. Findings indicated a threshold per capita income ($ 17.60 thousand) from which the effect of income inequality on carbon emissions changes. Based on these results, Marginal Properties to Emit (MPE) is more significant for poor people in low-income provinces than rich ones. Therefore, the government should adopt appropriate policies to increase the income of farmers so that the policy of income distribution, along with social justice, also improves the quality of the environment.