The impact of income inequality on carbon dioxide emissions in Malaysia

Abstract

This thesis investigates the environmental Kuznets curve (EKC) and the link between economic growth, income inequality, population, urbanization, industrialization, energy consumption, open trade, and Carbon Dioxide (CO2) emissions in Malaysia, covering the period from 1989 to 2018. For this purpose, the study employs the Autoregressive Distributed Lag (ARDL) bounds testing approach and Error Correction Model (ECM) to examine the short-run and long-run relationship among the selected variables of this study. Furthermore, Toda-Yamamoto is used to investigate the causality among the variables. The empirical results obtained from the analysis suggest the EKC hypothesis. Besides, the results of ECM suggest that economic growth, income inequality, energy consumption, and industrialization have a positive relationship with carbon dioxide. Still, urbanization has an insignificant negative connection with CO2 emissions. In addition, the findings obtained from the Toda-Yamamoto Granger causality test reveal that there is bidirectional causality among CO2 emissions and all explanatory variables. Finally, the results obtained from several diagnostic and stability tests are robust, stable, and reliable. The finding of this study could be highly significant for adequate policymaking to reduce CO2 emissions in Malaysia.