Towards low carbon and sustainable environment: does income inequality mitigate ecological footprints in Sub-Saharan Africa?

This paper contributes to the literature on the environment-economic development nexus by examining whether higher income inequality mitigates environmental degradation in Sub-Saharan Africa for the period 1995-2018. The paper uses the second-generation panel data estimation techniques through the novel augmented Anderson-Hsiao (AAH) estimator. This method allows regressors to be self-instrumenting and efficient with panel data where the cross-sectional units are greater than time and remains valid even when errors are correlated. The result of the Westerlund cointegration confirms the existence of a long-run relationship. Also, the AAH estimation finds that a 1% increase in income inequality is associated with a 0.567 decline in environmental degradation. Furthermore, a rise in GDP per capita is linked to a reduction in environmental pollution. However, it does not validate the existence of the environmental Kuznets curve hypothesis. Population growth and urbanization were found to exacerbate environmental degradation while access to electricity enhances a sustainable environment. To ensure the robustness of the AAH estimation, the Pseudo-Poison Maximum Likelihood Estimator with the high dimensional fixed effects was used. The results showed that, although the effects were smaller, all the coefficients survived. Therefore, our findings substantiate the marginal propensity to emit hypothesis which posits that in economies with high inequality, there is the likelihood that a large proportion of the population would reduce their energy and other carbon-intensive consumption, which consequently improves environmental quality. Although this channel of reducing emissions is not sustainable as it comes with huge economic losses. Policy recommendations were provided.