ANALYZING THE RELATIONSHIP BETWEEN POLLUTION AGGRAVATION AND INCOME INEQUALITY: A COMPARATIVE STUDY OF CHINA AND PAKISTAN

Abstract

Income inequality is considered as an undesired situation among the fast-growing economies worldwide. Various countries have been focusing on the reduction of this particular economic issue around the globe. Pakistan and China are currently developing economies and they are unable to afford such type of economic restrictions for their fast development. In this regard, the study highlights the possible historical role of environmental aggravation in addressing this particular issue. The research focuses on the effects of environmental aggravation on income inequality in Pakistan as well as China. The research used yearly time series data during 1990 to 2022 to capture the desired outcomes. Multiple analysis strategies have been utilized i.e. ADF analysis, ARDL analysis, VECM analysis and multiple diagnostic analyses for getting the main objective. Findings of ADF analysis revealed stationary level of all the factors at 1st difference except population. ARDL as well as VECM analyses highlight positive impacts of environmental aggravation, inflation and population on income inequality in both research areas. Therefore, trade openness and capital formation may be used to decline the income inequality. The multiple diagnostic analyses found stability and reliability in the coefficients utilized in the current research report. The analyst suggests significance reduction in CO2 emissions, inflation rate and population to control the increasing income inequality in the research areas. Trade openness and capital formation may be elevated for the reduction of unequal income distribution in the regions.