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Inequality and Renewable Energy Consumption in Sub-Saharan Africa: Implication for High Income Countries

Asongu, Simplice and Odhiambo, Nicholas (2020): Inequality and Renewable Energy Consumption in Sub-Saharan Africa: Implication for High Income Countries. Forthcoming in: Innovation: The European Journal of Social Science Research

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Abstract

The study investigates conclusions from the scholarly literature that for low and middle-income countries, higher income inequality is linked with lower carbon dioxide (CO2) emissions. Using a sample of 39 sub-Saharan countries consisting of lower- and middle-income countries, this study investigates how increasing inequality affects renewable energy consumption. Three income inequality indicators are used, namely: the Gini coefficient, the Palma ratio and Atkinson index. The empirical evidence is based on quadratic Tobit regressions. The investigated assumption is only partially valid because a net positive impact is apparent only in one of the three income inequality variables used in the study. Hence, it is difficult to establish whether the inequality or equality hypothesis underpinning the nexus between income inequality and renewable energy consumption hold for Sub-Saharan Africa. However, based on the significant results in terms of the threshold, the equality hypothesis is valid when the Atkinson index is below a threshold of 0.6180 while the inequality hypothesis becomes valid when the Atkinson index exceeds the threshold of 0.6180. Hence, as the main policy implication, for the equitable redistribution of income to be promoted and, therefore, for policies that favor income inequality for renewable energy consumption not to be encouraged, policy makers should keep the Atkinson index below a threshold of 0.6180. An implication for Europe and/or high income countries is provided, notably, that the equality hypothesis on the nexus between income inequality and CO2 emissions may not withstand empirical scrutiny but contingent on: (i) the measurements of income inequality and (ii) inequality thresholds when a specific income inequality measurement is retained.

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