ABSTRACT
In the early 1990s several studies found an inverted-U relationship between environmental degradation and per capita income (the so-called environmental Kuznets curve). Since then, the literature on this subject has grown exponentially trying to overcome the limitations of the previous contributions. Some recent studies have started to question the emphasis on income growth to explain environmental degradation and argued that other explanatory variables should be included in the models beyond gross domestic product (GDP). Among the studies that introduce new regressors, only few works focus attention on inequality as an additional explanatory variable and examine its relationship with environmental degradation. For this purpose, present empirical studies generally use pooled ordinary least squares (OLS) models as preferred specification, getting mixed or conflicting results. Pooling observations, however, disregards the heterogeneity of the countries included in the panel. The aim of this chapter is to show that the results obtained in the literature may heavily depend on the chosen specification and verify how these results change if we adopt a fixed-effect (FE) model that, in our opinion, is more appropriate than the pooled OLS model in the present context.
