THE NEXUS BETWEEN INCOME INEQUALITY AND CO2 EMISSIONS: EMPIRICAL EVIDENCE FROM TÜRKİYE

Abstract

This study examines the short- and long-run relationships among per-capita CO₂ emissions, per-capita income, income inequality, foreign direct investment (FDI), financial development, and trade openness in Türkiye from 1975 to 2022. The study analyzes these relationships using the Autoregressive Distributed Lag (ARDL) bounds-testing approach. The bounds-test results indicate a long-run cointegrating relationship among the variables. The long-run estimates show that per-capita income and income inequality have positive and statistically significant effects on CO₂ emissions. The long-run FDI coefficient is positive but statistically significant only at the 10% level, whereas the long-run coefficients on financial development and trade openness are not statistically significant. In the short run, income growth increases emissions. The error-correction coefficient indicates that approximately 38.7% of the previous period’s disequilibrium is corrected within one year. The Granger-causality results indicate a bidirectional predictive relationship between income and emissions. Overall, the findings underscore the importance of incorporating income distribution and social justice considerations into environmental and macroeconomic policy design.