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Income Inequality and the Economic Growth-Environmental Pollution Nexus in Iran: Smooth Transition Regression (STR) Approach

Document Type : Original Article

Authors

1 Assistant Professor, Department of Economics, Faculty of Economics, Management and Administrative Sciences, University of Semnan, Semnan, Iran

2 M.Sc. in Economics, Department of Economics, Faculty of Economics, Management and Administrative Sciences, University of Semnan, Semnan, Iran.

Abstract

This question has always been raised whether economic growth can lead to the reduction of environmental pollution. In this regard, the present study investigats the relationship between economic growth and environmental pollution in Iran during the period 1984-2021, considering per capita GDP and per capita ecological footprint as indicators of economic growth and environmental pollution, respectively. The results obtained from applying the Smooth Transition Regression (STR) approach, with the Gini income inequality index as the transition variable, indicate that economic growth affects the per capita ecological footprint within a two-regime framework. According to the results, in the first regime, when income inequality is below the threshold level of GINI* = 0.418777, increased economic growth leads to a reduction in the ecological footprint. However, in the second regime, when income inequality exceeds this threshold, economic growth leads to an increase in the ecological footprint. The results suggest that if income inequality is below the threshold level of GINI* = 0.418777, implementing macroeconomic policies aimed at improving economic growth can lead to a reduction in environmental pollution. Therefore, it is recommended that economic planners and policymakers seriously pursue income inequality reduction policies alongside growth policies to achieve a reduction in environmental pollution.

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Economic Policies and Research
Volume 3, Issue 2 - Serial Number 10
August 2024
Pages 87-111
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