Income distribution and environmental quality in China: A spatial econometric perspective

Paying heed to a surge of concern about the serious and continuous environmental degradation that is currently being witnessed in China, in this paper we investigate whether income distribution contributes to environmental deterioration. Environmental degradation can be linked not only to income growth, we argue, but also to increases in income inequality. The study calculated the Gini coefficient of 31 province using a data set of 403 city level data in mainland China and estimated the linkage between income distribution and environmental deterioration utilizing balanced data for 31 Chinese provinces during the period 1996-2015. First, the degree of environmental pollution was calculated by constructing a comprehensive index system, which was formulated using the entropy method, based on six environmental indicators. Then, a spatial panel regression model was also employed in order to estimate whether income inequality is likely to be a relevant factor in environmental deterioration in China. The estimation results showed that: using the index and spatial analysis techniques, significant spatial positive agglomeration were found existing between Chinese provinces in terms of their levels of environmental degradation; the influencing factors estimation results substantiated the existence of an invert U-shaped relation, lending support to the Environmental Kuznets curve theory; more importantly, the study found that income inequality played a significant role in preventing environmental degradation, suggesting that an appropriate level of income inequality over a delimited period is beneficial to improving environmental quality. It should, however, also be emphasized that optimizing the country's income distribution is remains an important long-term task for the Chinese government; other factors were found to exert different types and magnitudes of impacts on environmental pollution. Results showed that many factors-for instance, energy intensity, the share of secondary industry, population density, and foreign direct investment-contribute to environmental deterioration. Conversely, our findings also indicate that rising urbanization levels can have a positive effect on environmental quality. In addition, no clear evidence was found to suggest that local government expenditure is related to environmental degradation. (C) 2018 Elsevier Ltd. All rights reserved.