Essays on Income Inequality and the Environment

This dissertation considers two of the most pressing concerns of the current time, income inequality and exposure to pollution, and provides evidence that these two concerns may in fact be causally linked. In order to do this, I assemble novel datasets on income inequality and pollution exposure, and propose an strategy for causally identifying the effect of the former on the latter. In the first substantive chapter, I develop a new dataset on income inequality measured at the US state and metropolitan area level. I compare the trends in income inequality measured using different income definitions. In general, pre-tax, pre-transfer income inequality has increased in most states since 1980, but post-fiscal income inequality has seen slow or no growth since about 2000. I conduct inference on how income inequality has changed using a semi-parametric bootstrap method, and consider potential correlates with state-level income inequality. I find that de-unionization is perhaps the most important factor driving rising inequality. In the second substantive chapter, I leverage satellite-derived remote sensing data on ground-level concentrations for two important pollutants (NOx and PM2.5) to measure the distribution of pollution exposure. I propose a dashboard approach to measuring environmental inequality and environmental justice, proposing and applying several candidate measures to the satellite datasets. I find that environmental inequality has largely decreased since 1998, as has average exposure. I consider potential correlations between neighborhood demographics and the distribution of exposure, but find inconclusive results. In the third substantive chapter, I attempt to resolve this ambiguity by considering whether rising income inequality within metropolitan areas (the subject of the first chapter) might causally affect the distribution of exposure across people (the subject of the second). Using a simulated instrumental variables identification strategy designed to address potential endogeneity due to locational sorting, I find that income inequality decreases the average level of exposure, but increases environmental inequality. I argue this is consistent with the benefits of pollution reduction accruing to the most advantaged, and provide evidence that this may work through the political system: inequality increases the responsiveness of politicians to the environmental demands of the rich