Income inequality and CO2 emissions in belt and road initiative countries: the role of democracy

This paper investigates the interaction effects of income inequality and democracy on CO2 emissions. The spatial panel model, which accounts for the spatial spillover effects across countries, is used. Using the panel data covering 41 Belt and Road initiative countries, the results indicate significant positive spatial spillovers effect to country-level CO2 emission activity. The Kuznets Curve hypothesis, which assumes that reverse U relation presents between income and CO2 emissions, is identified. Empirical results provide evidence that democracy levels promote the nonlinear nexus between income inequality and CO2 emissions. High levels of inequality, ceteris paribus, in conjunction with poor democratic institutions are likely to result in higher pollution. The findings are robust to various robustness tests.