Environment, Development and Sustainability

https://doi.org/10.1007/s10668-020-00870-3

Economic growth, inequality, and environment nexus:

using data mining techniques to unravel archetypes
of development trajectories

Datu Buyung Agusdinata1   · Rimjhim Aggarwal1 · Xiaosu Ding2

Received: 22 December 2019 / Accepted: 7 July 2020

© Springer Nature B.V. 2020

Abstract
Implementation of sustainable development goals (SDGs) requires evidence-based analy-
ses of the interactions between the different goals to design coherent policies. In this paper,
we focus on the interactions between economic growth (SDG 8), reduced inequalities (SDG
10), and climate action (SDG 13). Some previous studies have found an inverted U-shaped
relationship between income per capita and inequality, and a similar relationship between
income per capita and environmental degradation. Despite their weak theoretical and
empirical bases, these hypothesized relationships have gained popularity and are assumed
to be universally true. Given differences in underlying contextual conditions across coun-
tries, the assumption of universal applicability of these curves for policy prescriptions can
be potentially misleading. Advances in data analytics offer novel ways to probe deeper into
these complex interactions. Using data from 70 countries, representing 72% of the world
population and 89% of the global gross domestic product (GDP), we apply a nonparamet-
ric classification tree technique to identify clusters of countries that share similar develop-
ment pathways in the pre-recession (1980–2008) and post-recession (2009–2014) period.
The main outcome of interest is the change in per capita C ­ O2 emissions (post-recession).
We examine how it varies with trajectories of GDP growth, GDP growth variability, Gini
index, carbon intensity, and ­CO2 emissions (pre-recession). Our study identifies twelve
country clusters with three categories of emission trajectories: decreasing (four clusters),
stabilizing (three clusters), and increasing (five clusters). Through the application of data
mining tools, the study helps unravel the complexity of factors underlying development
pathways and contributes toward informed policy decisions.

Keywords  Sustainable Development Goals (SDGs) · Development trajectories ·

Archetypes · Clustering · Classification tree · Environmental Kuznets curve

Electronic supplementary material  The online version of this article (https​://doi.org/10.1007/s1066​

8-020-00870​-3) contains supplementary material, which is available to authorized users.

* Datu Buyung Agusdinata

bagusdin@asu.edu
Extended author information available on the last page of the article

13
Vol.:(0123456789)
 D. B. Agusdinata et al.

1 Introduction

As countries work toward the implementation of the 17 sustainable development goals

(SDGs), which are part of the United Nations (UN) 2030 Agenda, a question raised fre-
quently regards the synergies and trade-offs among the goals and their implications for the
design of development strategies (Visbeck and Ringler 2016). In UN rhetoric, the agenda
is “indivisible” and countries should take a holistic approach toward implementing the
agenda as a whole (United Nations 2015). However, the knowledge base needed to address
the goals in a systemic and informed way is insufficient (Visbeck and Ringler 2016). In
this paper, we focus on the interaction between the following three goals: economic growth
(SDG 8), reduced inequalities (SDG 10), and climate action (SDG 13). These goals under-
pin the economic, social, and environmental dimensions of sustainable development,
respectively, and thus examining the interactions between these goals may help understand
some of the complexities and nuances of the Agenda.
Scientific understanding of the trade-offs between these goals has undergone several
shifts, with significant impacts on policy making all over the world. Assuring sufficient
economic growth was long regarded by development economists as being key to not only
a path of prosperity, but also critical to reducing poverty (Dollar et al. 2013). Within this
orthodoxy, which dominated development economics until much of the 1980s, rising ine-
quality was seen to be more or less inevitable and not something to worry about, particu-
larly if the incidence of poverty was falling. Over time, and particularly since 2000, rising
inequality has emerged as one of the most pressing problems facing humanity (Hardoon
et al. 2016; Piketty and Saez 2014; Stiglitz 2012), which threatens the attainment of other
sustainable development goals, notably poverty reduction. Rising levels of inequality have
become a key political issue all over the world in recent years, with the Occupy move-
ment protests receiving widespread attention in media and policy circles (Forster et  al.
2011; Organisation for Economic Co-operation and Development, OECD 2014). Former
US President, Barack Obama, characterized inequality as “the defining issue of our time,”
back in 2013 (Kaplan 2013). A study by the Asian Development Bank found that in Asia,
the divide between the rich and the poor has risen since the 1990s, noting that “had Asian
growth been achieved without rising inequality, an additional 240 million people would
have been lifted out of poverty over the past 2 decades” (Kanbur et al. 2014, p. xxii). This
example illustrates how critical it is to understand the interactions between multiple devel-
opment goals to design effective policies.
Apart from the intrinsic impact of rising inequality for social cohesion, questions have
also been raised about the impacts of rising inequality on other outcomes of interest, such
as environmental degradation. The environmental crisis has manifested, especially since
the 1950s, in the rapid rise in environmental pressures (Steffen et al. 2011), resulting nota-
bly in widespread changes in natural ecosystems (Duraiappah et  al. 2005) and climatic
disturbances (Stocker et  al. 2013). The simultaneous worsening of each of these crises
raises the question as to whether these changes are mutually reinforcing and how these
might together impact the sustainability of the society and the planet. Production of usa-
ble knowledge on sustainable and inclusive development pathways is thus urgently needed
(Clark et al. 2016).
There is a long history of systematic empirical inquiry into the nature of these relation-
ships. Simon Kuznets in his path-breaking paper (Kuznets 1955) hypothesized that income
inequality increases at first as per capita income grows, reaches a peak and then it gradually
declines, forming an inverted U-shaped curve. Extending this work further to study the

13
Economic growth, inequality, and environment nexus: using…

environmental impacts of the North American Free Trade Agreement (NAFTA), Grossman
and Krueger (1991) were the first to systematically explore the relationship between per
capita income and environmental degradation (measured as S ­ O2 emissions). They found an
inverted U-shaped relationship, which is referred to as the Environmental Kuznets Curve
(EKC). Several studies have examined these two Kuznets related hypotheses and come up
with significantly different results; recent surveys have attempted to explain these differ-
ences in terms of differences in the underlying theoretical model, the empirical methodol-
ogy used, and the underlying heterogeneity in experiences across countries (Stern et  al.
1996; Grunewald et  al. 2017; Berthe and Elie 2015; Andrée et  al. 2019). Given the het-
erogeneity across countries, several researchers have proposed studying the case of each
country individually (Baek and Gweisah 2013; Ota 2017; Andrée et al. 2019). While these
country-based studies can be very helpful, there is also a growing demand to link these
country-specific experiences with global narratives such as those related to the SDGs and
climate change.
Our study is motivated by the call for a greater scientific understanding of the underlying
trade-offs between growth, inequality, and climate action at the country level and the need
to link these country-level experiences to global narratives. To that end, our study makes
several significant departures from the existing literature and asks a somewhat different
set of research questions, as follows. First, instead of studying the relationship between
growth and inequality on the one hand, and growth and environment on the other as two
separate relationships, we investigate and compare countries’ development pathways from
the perspective of growth-inequality-environment nexus (Baloch et al. 2018; Eriksson and
Persson 2003; Ota 2017). Second, instead of further refining previous econometric specifi-
cations to characterize a single curve that captures this relationship for all the countries in
the world, we use a data mining technique called classification and regression tree (CART),
to identify different clusters of countries and patterns of interactions (Breiman et al. 1984).
We then use this cluster analysis to identify different archetypes of development pathways.
Archetypes are recurrent patterns that hold across a phenomenon of interest (Oberlack
et al. 2019). Examining these archetypes of development pathways can help answer policy-
relevant questions, such as what are the different kinds of sustainable and unsustainable
development pathways followed by countries around the world? What do these different
pathways reveal about the trade-offs and synergies between growth, inequality, and climate
action?
The paper is organized as follows. Section 2 reviews the literature on the multiple rela-
tionships between economic growth, inequality, and environmental quality. Section 3 out-
lines the methodology; here, we define and justify the variables used in the model and
describe the classification and regression tree (CART) method used to identify country
clusters and archetypes of development pathways. In Sect. 4, we analyze the results from
the CART method and discuss the patterns revealed by the different archetypes of develop-
ment pathways. The paper concludes with a summary of the main results and their policy
implications.

2 Background and literature review

Early models of economic growth and development (e.g., Rostow 1956; Kuznets 1955)
assumed that once the process of industrialization has been initiated, economic growth
follows a broadly predictable pattern leading to a convergence between the structure and

13
 D. B. Agusdinata et al.

resource intensity of economies over the long run such that a single curve can summarize
the development experience of different countries. This idea of convergence underpinned
the search for the theoretical mechanisms that could explain the shape of this curve and
the empirical models that could test for it. Since there are quite a few complete reviews of
the extensive literature that grew out of this research, we will focus on highlighting a few
key findings that underlie the design of our research. For simplicity, we have organized
this review in terms of the three constituent relationships of the growth, inequality, and
environment nexus. These are the relationships between economic growth and inequality,
economic growth and environmental quality, and inequality and environmental quality.

2.1 Relationships between economic growth and inequality

The question about how inequality is impacted as income per capita increases during the
process of economic development has motivated a lot of scholarly interest. The inverted
U-shaped relationship between income per capita and inequality proposed by Kuznets has
been highly influential in this regard, although Kuznets’ research was based on data from
a handful of countries for a very limited period of time. A few papers, such as Ahluwalia
(1976) and Barro (2008), found support for it using cross-sectional data, whereas others
such as Saith (1983) and Anand and Kanbur (1993) did not find support.
There has also been a lot of interest in exploring the other side of this relationship, i.e.,
how inequality, in turn, impacts the growth process. Figure 1 outlines the various mecha-
nisms through which an increase in inequality may impact growth. While early theoretical

Fig. 1  Multiple mechanisms through which inequality impacts economic growth

13
Economic growth, inequality, and environment nexus: using…

work (e.g., Kaldor 1957) proposed a positive effect of inequality on growth based on sav-
ing and investment mechanisms, later studies based on political economy and socio-polit-
ical stability mechanisms predicted a negative effect. Departing from this characterization
in terms of simple linear relationships, Barro (2000, 2008) found that income inequality
has different effects on economic growth for poor and rich countries: Inequality encour-
ages growth in rich economies but slows it down in poor ones. Banerjee and Duflo (2003)
document an inverted-U relationship between inequality and growth: Higher inequality
enhances growth in more equal societies but reduces growth in less equal ones. Most of the
existing empirical literature in this area focuses on global data, ignoring potential heteroge-
neity across specific country experiences, which could be critical as we show in this paper.

2.2 Relationships between economic growth and environmental quality

The concept of environmental Kuznets curve (EKC), which shows pollution at first increas-
ing and then decreasing as income increases, was originally advanced by Grossman and
Krueger (1991) in the context of an international trade agreement (i.e., NAFTA). Using
­SO2 emissions and dark matter (fine smoke) as measures of environmental degradation,
they found the turning points for S ­ O2 and dark matter to be around an average per capita
income of $4000–$5000 measured in 1985 U.S. dollars. Since Mexico’s per capita income
at that time was around U.S. $5000, they used this evidence to argue that Mexico was at
the “critical juncture in its development process where further growth should generate
increased political pressures for environmental protection and perhaps a change in private
consumption behavior” (ibid, p. 36). The underlying policy implication was to counter the
arguments against Mexico joining NAFTA, which were based on fears about free trade and
growth resulting in increasing environmental degradation.
Since the introduction of the EKC hypothesis, numerous empirical studies have been
undertaken—applying different samples of countries/regions, with varied types of pollut-
ants surveyed over different periods—leading to diverse results concerning the validity of
the EKC. For instance, Shafik and Bandyopadhyay (1992) estimated EKCs for ten different
environmental indicators, including carbon dioxide emissions per capita, and found that
the nature of the relationship differs depending on the pollutant under consideration. For
some indicators (such as lack of clean water and lack of urban sanitation) that are related
to the provision of basic services, an increase in per capita was found to enable higher
investments in providing access. For other indicators that relate to protection of the envi-
ronment, the results were more mixed: for the two measures of deforestation used in the
study, no significant relationship with per capita income was found, while the indicator
for river quality showed worsening with an increase in per capita income. The indicators
related to air pollution were found to conform to the EKC hypothesis, while both municipal
waste and carbon emissions per capita increased unambiguously with rising income. The
broader range of indicators examined by Shafik and Bandyopadhyay (1992) shows a much
more ambiguous picture of the relationship between environment and development than
Grossman and Krueger’s (1991) study.
Moreover, the results often differ even among the studies that have used the same sub-
set of environmental measures, such as C ­ O2 or S
­ O2 emissions. For example, out of eight
studies that incorporated C­ O2 emissions in the model (i.e., Holtz-Eakin and Selden 1995;
Tucker 1995; Cole et al. 1997; Hill and Magnani 2002; Lantz and Feng 2006; Shafik 1994;
De Bruyn et al. 1998; Friedl and Getzner 2003), the last three studies failed to identify the
EKC pattern. While some of these differences can be attributed to the specific parametric

13
 D. B. Agusdinata et al.

approach used, a recent study using a nonparametric data mining technique also did not
find support for a single EKC and proposed studying country-specific curves. Thus, it
seems that the debates on EKC are far from being resolved, and the “EKC literature has
raised more questions than it has answered” (Panayotou 1997: 465).

2.3 Relationships between inequality and environmental quality

Since the 1990s, in particular, there has been growing interest in examining how levels of
inequality influence environmental quality. Figure  2 provides a summary of the multiple
theoretical mechanisms that have been proposed to explain this relationship. A complete
review can be found in Torras and Boyce (1998), Cushing, Morello-Frosch et  al. (2015)
and Berthe and Elie (2015). As shown in Fig. 2, the theoretical literature has explored both
economic and political mechanisms through which inequality may influence environmental
quality and found the overall impact to be ambiguous. As greenhouse gases build up and
the climate changes, there is also the possibility of a feedback effect. For instance, a recent
study found that long-term warming will generally increase growth in cool countries and
decrease growth in warm countries, further exacerbating global inequalities (Diffenbaugh
and Burke 2019).

2.4 Heterogeneity and context specificity of the growth‑inequality‑environmental

quality nexus

Breaking away from the idea of convergence that underpins the theoretical and empirical
studies reviewed above, several researchers have found that “countries follow individual
curves with heterogeneity in the location, shape, and height of tipping points, depending
on the composition of the economy” (Andrée, et al. 2019, p. 3). To probe deeper into how
this cross-country heterogeneity arises from differences in the composition of the different

Fig. 2  Multiple relationships between inequality and environmental quality

13
Economic growth, inequality, and environment nexus: using…

economies, we look into C ­ O2 emissions intensity, which is a key determinant of per capita
emissions (Baumert et al. 2005). ­CO2 emissions intensity is a function of two variables: the
first is energy intensity or the amount of energy consumed per unit of GDP and the second
is fuel mix or, more specifically, the carbon content of the energy consumed in a country.
Each of these two factors, in turn, depends on several other factors as shown in Fig. 3.
Energy intensity and fuel mix vary widely across economies. Transition economies such
as Russia and Ukraine tend to have the highest energy (and carbon) intensities (Baumert
et  al. 2005). Energy intensities in developing countries tend to be somewhat higher than
in industrialized countries because the former generally have a higher share of their GDP
coming from energy-intensive manufacturing industries such as basic metals. Industrialized
countries, on the other hand, have greater shares of their economies composed of service
sectors that have low carbon intensities, and these countries tend to import carbon-inten-
sive goods from developing countries. Fuel mix, which is another important determinant of
carbon intensity, depends on natural endowments of different fuel sources in the country as
well as the energy policies followed over time. Among the different fuel sources, coal has
the highest carbon content, followed by oil and natural gas. Accordingly, if two nations are
identical in energy intensity, but one relies more heavily on coal than the other, its carbon
intensity will be higher.
The trajectory of carbon intensity has varied widely across countries depending on the
trends in these underlying variables. For example, in the European Union (EU), carbon
intensity has been declining since the 1990s and reflects reductions in both energy intensity
and carbon content (Baumert et al. 2005). In the USA, the decline in carbon intensity over
the same period stems almost entirely from reduced energy intensity. In some other cases,
the two factors counterbalance one another. In India, for example, the increased carbon
content of fuels has almost entirely offset the gains made through reduced energy intensity.
South Korea’s case is the reverse, where the switch to lower carbon fuels have nearly off-
set the sizable increase in energy intensity (Baumert et al. 2005). Globally, the decline in
overall carbon intensity so far has stemmed more from reduced energy intensity than from
changes in the fuel mix.

Fig. 3  Carbon intensity of an economy and its determinants

13
 D. B. Agusdinata et al.

These trends in carbon intensity, together with trends in population and GDP growth,
determine trends in per capita carbon emissions. In several emerging economies, the
declines in carbon intensity were accompanied by significant increases in GDP, leading to
increases in absolute carbon emissions. The most notable case is China, where the effect of
significant intensity declines was more than offset by substantial GDP growth. Similarly,
in the USA, the decline in carbon intensity was offset by increases in population and GDP
(Baumert et al. 2005).
The realization about these varied sources of heterogeneity across countries has led sev-
eral researchers to conduct country-/region-specific studies on the growth-inequality-envi-
ronmental quality nexus. In the U.S. context, a study by Baek and Gweisah (2013) found
that economic growth enhances environmental quality, and income equality has a positive
effect on the environment. In the case of India and China, however, Wolde-Rufael and
Idowu (2017) did not find any evidence of causality between income inequality and ­CO2
emissions. For both countries, the disparity of income was found to be the least important
factor in determining C ­ O2 emissions. This heterogeneity across country-specific experi-
ences has motivated our empirical approach which we explain in the next section.

3 Methodology

Given the likelihood of significant structural disruptions brought about by the 2008 eco-
nomic recession that originated in the USA and spread to most of the industrialized world,
we divided our study period into two: pre-recession (1980–2008) and post-recession
(2009–2014) period. While most countries witnessed a deceleration in their growth rates in
the post-recession period, some countries such as Poland, Slovakia, Moldova, India, China,
South Korea, Indonesia, Australia, Uruguay, Colombia, and Bolivia grew their economies
in this period. Furthermore, a food and energy crisis also occurred around the same time,
when several major resource systems were impacted, leading to structural changes in sev-
eral economies.

3.1 Model

To analyze these structural shifts that shape a country’s development pathway, we devel-
oped a nonparametric model using the variables listed in Table 1. Most of these variables

Table 1  List of variables used in the model

Variable description Pre-2008 recession period Post-2008 recession period

Slope of per capita carbon dioxide emissions PerCapita_CO2_Slope_pre PerCapita_CO2_Slope_post

Average carbon intensity of GDP from energy Avg_CO2/GDP_pre Avg_CO2/GDP _post
consumption
Slope of GDP growth rate GDP_Growth_Slope_pre GDP_Growth_Slope_post
Variability of GDP growth (measured in terms GDP_Growth_SD_pre GDP_Growth_SD_post
of standard deviation, SD)
Slope of the Gini index to represent income Gini_Slope_pre Gini_Slope_post
inequality

The terms per capita ­CO2 emissions, carbon emissions, and emissions are used interchangeably

13
Economic growth, inequality, and environment nexus: using…

were represented in terms of their slopes over a period of time, rather than their levels at
any point in time. These slopes indicate the direction and relative strength of the trend for
each variable. This focus on trajectories instead of levels of the underlying variables gives
a better sense of the underlying dynamics of the integrated system (Kondaveeti 2012). This
is because the various variables that constitute the integrated system change at a different
pace. For instance, an acceleration in the scale of economic activity may lead to a rapid
buildup of pollutants that exceed the assimilative capacity of the environment. This rapid
buildup may lead to the crossing of critical thresholds and irreversibilities before policy
and institutions, which are slow-changing variables, can adapt.
The dependent variable of interest in the model is the trajectory of emissions level,
measured in terms of the slope of per capita carbon emissions in the post-recession period
(PerCapita_CO2_Slope_post). Emissions were measured in per capita terms to account for
differential rates of population growth across our sample of countries. The list of independ-
ent variables includes the slope of GDP growth and slope of inequality (as measured by the
Gini index). Besides these variables that are of direct relevance given our research objec-
tive, we have also included carbon intensity of GDP from energy emissions and variability
of GDP growth as additional explanatory variables. In modeling carbon emissions, GDP is
generally viewed as an indicator of the scale of economic activity, while carbon intensity
is viewed as an indicator of the structure of the economy. We added variability of GDP
growth as an additional explanatory variable because the slope of GDP growth by itself
may be a poor representation of the underlying growth dynamics if there is a lot of vari-
ability around growth rates, as happened during our study period for a few countries.
The model is formulated as follows:
Dependent variable = {PerCapita_CO2_Slope_post} (1)

Independent variables = {PerCapita_CO2_Slope_pre,

Avg_CO2/GDP_pre,
Avg_CO2/GDP_post
GDP_Growth_Slope_pre,
GDP_Growth_Slope_post, (2)
GDP_Growth_SD_pre,
GDP_Growth_SD_post,
Gini_Slope_pre,
Gini_Slope_post}

In our model, the variables of interest are not represented in terms of their levels at any
point in time but as slopes over a period of time. These slopes indicate the direction and
relative strength of the trend for each variable. The trend is classified into three categories:
stabilizing (− 0.01 < slope < 0.01), decreasing or downward (slope ≤ −0.01), and increasing
or upward (slope ≥ 0.01).
To illustrate, we compare the development pathways of two countries: China and the
USA (Figs.  4, 5). China, representing emerging economies, for example, had per capita
­CO2 emissions trending upward in both periods, with the slope higher in the post-recession
period. China had inequality trending upward in the pre-recession period and downward in
the post-recession period. China’s economic growth trended upward before the recession
but changed direction after the recession.

13
 D. B. Agusdinata et al.
CO2/GDP (Kiloton CO2 per billion

CO2/GDP (Kiloton CO2 per billion

China Avg_CO2/GDP_pre China Avg_CO2/GDP_post
900 300
800
250
700
2005 US$ )

600 200

2005 US$ )
500
150
400
300 100
200 Average = 454.52 Average = 226.66
50
100
0 0
0 5 10 15 20 25 30 28 29 30 31 32 33 34 35
Year: 0=1980 Year: 29=2009

China GDP_Growth_Slope & SD_pre China GDP_Growth_Slope & SD _post

16 12
14 y = 0.03x + 9.54 y = -0.60x + 27.49
10
GDP Growth (%)

GDP Growth (%)

12
10 8

8 6
6
Standard Deviaon = 2.88 4
4 Standard Deviaon = 1.30
2 2
0 0
0 5 10 15 20 25 30 28 29 30 31 32 33 34 35
Year: 0=1980 Year: 29=2009

China Gini_Slope_pre China Gini_Slope_post

60 60

50 50

40 40
GINI
GINI

30 30

20 20
y = 0.94x + 21.58 y = -2.40x + 120.29
10 10

0 0
0 5 10 15 20 25 30 28 29 30 31 32 33 34 35

Year: 0=1980 Year: 29=2009

China PerCapita_CO2_Slope_pre China PerCapita_CO2_Slope_post

CO2 emissions (metric tons)

CO2 emissions (metric tons)

6 8
7
5
6
4
5
3 4
3
2 y = 0.33x - 3.66
y = 0.12x + 1.15 2
1
1
0 0
0 5 10 15 20 25 30 28 29 30 31 32 33 34 35

Year: 0=1980 Year: 29=2009

Fig. 4  Illustration of China’s pre- and post-recession development trajectory in terms of carbon intensity,
slope of GDP growth rate and variability, Gini coefficient, and per capita emissions

Now coming to the case of the USA, as a representative of a developed economy, we

find that both per capita emissions and growth rate were on a declining trend in the pre-
recession period. In the post-recession period, however, emissions have been declining
despite accelerating economic growth. While increasing in the pre-recession years, the
Gini index has been declining after the recession. The examples above illustrate that
each country follows a unique pathway with respect to social, economic, and environ-
mental conditions. This pathway is represented not only by the direction but also by the
rate of change and its variability over time.

13
Economic growth, inequality, and environment nexus: using…

CO2/GDP (Kiloton CO2 per billion

CO2/GDP (Kiloton CO2 per billion

USA Avg_CO2/GDP_pre USA Avg_CO2/GDP_post
120 52
100 51
80
2005 US$ )

50

2005 US$ )
60 49
40 48
Average = 72.50 Average = 48.65
20 47
0 46
0 5 10 15 20 25 30 28 29 30 31 32 33 34 35
Year: 0=1980 Year: 29=2009

USA GDP_Growth_Slope & SD_pre USA GDP_Growth_Slope & SD _post

8 4
y = -0.01x + 3.06 y = 0.71x - 21.0
6 3
GDP Growth (%)

GDP Growth (%)

2
4
1
2 0
0 -1 28 29 30 31 32 33 34 35

0 5 10 15 20 25 30 -2
-2 Standard Deviaon = 2.04
Standard Deviaon = 1.88 -3
-4 -4
Year: 0=1980 Year: 29=2009

USA Gini_Slope_pre USA Gini_Slope_post

60 50.5
50 50
y = -0.37x + 60.02
40 49.5
49
GINI
GINI

30
y = 0.03x + 44.63 48.5
20 48
10 47.5
0 47
0 5 10 15 20 25 30 29 30 31 32 33 34 35
Year: 0=1980 Year: 29=2009
CO2 emissions (metric tons)

CO2 emissions (metric tons)

USA PerCapita_CO2_Slope_pre USA PerCapita_CO2_Slope_post

21 22
21 20
20 18
20 16
19 14
19 y = -0.003x + 19.72
12 y = -0.63x + 37.31
18 10
0 5 10 15 20 25 30 28 29 30 31 32 33 34 35
Year: 0=1980 Year: 29=2009

Fig. 5  Illustration of USA’s pre- and post-recession development trajectory in terms of carbon intensity,
slope of GDP growth rate and variability, Gini coefficient, and per capita emissions

As the above discussion illustrates, in general, trends give a good sense of the underly-
ing dynamics at the system level. However, it should be clear that in some cases, such as
the case of China’s GDP growth in the pre-recession period (1980–2008) in Fig. 4, there
is no clear trend. To better capture the underlying variation in such cases, we also included
the standard deviation of GDP growth in both pre- and post-recession periods, as additional
explanatory variables in our model. Figures 4 and 5 also show that the choice of 2008 as a
structural breakpoint may not be valid in each case; although given the disruptions brought
about by the economic recession, 2008 seems more defensible than the choice of any other

13
 D. B. Agusdinata et al.

year. For future work, alternative trends (e.g., S-curve, oscillation, exponential, and growth
plateau) can be explored to describe trajectories. The structural break point can also be
customized for each country.

3.2 Data sources and description

Our primary sources of data are the World Income Inequality Database (UNU-WIDER
2018) for Gini index, the World Bank’s Development Indicators database for GDP growth
­ O2 emissions, and The Shift project for carbon intensity of GDP from
rate and per capita C
energy consumption (The Shift project 2019). For some countries and variables, data were
found to be missing in some years due to reasons such as irregular measurements. To deal
with the paucity of data, we only included countries that have at least 20 data points for
each variable. Out of 159 countries considered, this criterion resulted in a final sample of
70 countries with 6221 time-series data points in total for further analysis. These countries
represent 89%, 72%, and 82% of the world’s share of GDP, population, and total carbon
emissions, respectively.

3.3 Classification and regression tree (CART) method

To estimate the relationships between the dependent and independent variables outlined
above, we employ a classification and regression tree (CART) method (Breiman et  al.
1984). CART represents a major milestone in the evolution of artificial intelligence,
machine learning, nonparametric statistics, and data mining. CART is a recursive partition-
ing procedure that classifies the categorical (classification tree) or continuous (regression
tree) data at each node (e.g., parent) using a set of if–then–else rules (Timofeev 2004). As
one of the top 10 most influential data mining methods, CART has been applied to many
applications including in the fields of biology, medical research, engineering, and finance
(Wu et al. 2008).
In contrast to statistical models, CART is a nonparametric model that does not rely on
any predefined underlying relationship between the target (dependent) variable and the pre-
dictors (independent variables). The classification tree algorithm involves an iterative pro-
cess in which two questions are asked and answered: (1) which independent variable in the
model should be selected to produce the maximum reduction in variability of the depend-
ent variable and (2) which value (i.e., splitting value) of the selected independent variable
results in the maximum reduction in variability of the dependent variable.
The CART analysis is performed using MATLAB software’s statistics and machine
learning toolbox (https​://www.mathw​orks.com/produ​cts/stati​stics​.html). The presentation
of a classification tree from CART analysis involves a trade-off between simplicity (repre-
sented by the number of clusters) and accuracy (represented by the degree of misclassifica-
tions). The number of clusters yielded by the CART analysis is strongly dependent on the
maximum allowed depth of the resulting tree. A shallower tree would yield fewer clusters
(more simplicity, less accuracy), while a deep enough tree would create a separate arche-
type for each country (less simplicity, more accuracy), which can lead to overfitting. The
resulting tree can be pruned to improve simplicity. The level of depth is determined by the
level of pruning. Prune level 0 yields a tree with the most clusters. The higher is the prun-
ing level, the lower is the number of clusters.
The trade-off between simplicity and accuracy can be resolved by accounting for two
types of errors: resubstitution and cross-validation. Resubstitution error is the difference

13
Economic growth, inequality, and environment nexus: using…

between the response training data and the predictions the tree makes of the response based
on the input training data. High resubstitution error indicates a poor accuracy of the CART.
For cross-validation error, we adopted an algorithm that splits the training data into 10
parts at random.
A new data set was created by removing a subset of 10% of the data, constructing a tree
using the remaining 90%, and using the resulting tree to classify the omitted 10%. This pro-
cess is repeated by removing each of ten subsets one a time. This method gives a good esti-
mate of the predictive power of the resulting tree since it tests the new trees on new data.
This data mining approach offers several advantages relative to parametric statistical
approaches used in previous research on this subject. In particular, it helps address some
of the major concerns related to nonlinearities and inadequate treatment of dynamics in
previous econometric specifications. Instead of relying on predefined functional forms and
relationships to capture a complex underlying reality, this approach enables discovery of
knowledge through the identification of varied patterns and relationships among variables.
These varied patterns arise due to the context specificity of development pathways. To
fully understand this variation and its implications for policymaking, we developed arche-
types of sustainable development pathways, as we explain in the next section.

3.4 Archetype analysis

Archetype analysis is a methodological approach that “identifies those configurations of

attributes that are shared across a set of cases and are crucial for describing the system
dynamics or causal effect of interest” (Oberlack et al. 2019, p. 3). In contrast with multi-
variate methods that focus on searching for a single general model to explain relationships
among variables, archetype analysis allows for the possibility of multiple models to explain
the diversity of relationships that may be observed in different contexts, while generalizing
across them by focusing on key factors and their associations that explain a phenomenon in
multiple cases. Archetype analysis is increasingly being used to understand recurrent pat-
terns of variables and processes that influence the sustainability of social-ecological sys-
tems in diverse locations at different times (e.g., Jager et al. 2015; Levers et al. 2018; Sietz
et al. 2017). We believe that this methodology can also facilitate the transfer of knowledge
regarding trade-offs and synergies among the SDGs and contribute to providing a strong
evidence base for policymaking.

4 Results and analysis

The resulting classification tree divides countries into different clusters, each of which
can be defined as a distinct archetype of development pathway (Fig. 6). Countries in the
same cluster are similar to each other with respect to their post-recession per capita ­CO2
emissions (referred to subsequently, simply as post-recession emissions) trajectory and the
socio-economic-environmental conditions. Each node in the classification tree represents
a relevant variable that can best distinguish each cluster. The splitting value is shown as a
mathematical inequality condition. If the condition is true, the left branch is followed. The
opposite of the condition applies to the right branch (SI, Tables S1–12, provide full details
on the clusters).
There are also some cases of misclassification in the classification tree. In particu-
lar, there are seven countries that have been placed in clusters where they share similar

13
 D. B. Agusdinata et al.

Fig. 6  Classification tree (CART) results: country cluster based on the dependent variable PerCapita_CO2_
Slope_post. At prune level 0, the resulting CART has the lowest cross-validation and resubstitution error
of 0.50 and 0.11, respectively. SI (Table S13) provides detailed measures of classification performance and
cluster data. Misclassified = 7 countries. (+), increasing shown in red; (−), decreasing, shown in green; (0),
stabilizing, shown in yellow; N, the number of countries within each cluster. Note CART splitting rule: an
instance goes left if CONDITION and goes right otherwise

characteristics of the independent variables with other cluster members, but differ in
terms of the characteristics of the dependent variable. For example, the following four
countries have been placed in clusters with an increasing trend of post-recession emis-
sions, although their observed trend of emissions is decreasing: Ukraine (Cluster 7),
Pakistan (Cluster 6), and Croatia and Honduras (Cluster 12). On the other end, three
countries (Bolivia, Colombia, and Vietnam) have been placed in a cluster with a
decreasing trajectory of post-recession emissions (Cluster 11), although the observed
trajectory in these countries is increasing. These anomalies within a cluster signal other
country-specific factors that may be at play in influencing its development pathway.
Based on the trajectories of the post-recession C ­ O2 emissions, the classification tree
reveals three clusters with stabilizing (five countries), four clusters with decreasing (29
countries), and five clusters with increasing trajectories of emissions (36 countries). The
countries and their post-recession emissions trends are mapped in Fig. 7. Most Western
countries with the exception of Canada, Germany, and Russia have decreasing trajectory
of per capita emissions.
The first and highest level division of country clusters in CART is found to be the
level of post-recession carbon intensity (i.e., Avg_CO2/GDP_post) (Node 1, Fig.  6).
Among the various explanatory variables in our model, this is the variable that is found
to produce the maximum reduction in variability of the dependent variable. The split
separates countries below and above an average carbon intensity of 40.6 Kiloton ­CO2
per billion 2005 US$ (Node 1). We classify carbon intensity less than this threshold
value as low (17 countries) and high otherwise (53 countries). While most of the OECD
countries are on the lower side of this threshold, some important exceptions with high
carbon intensity include USA, Belgium, Canada, Germany, and Australia.

13
Economic growth, inequality, and environment nexus: using…

Fig. 7  World map indicating country’s status regarding its observed post-2008 recession emissions trajec-
tory

4.1 Pathways for countries with relatively low carbon intensity

It cannot be assumed a priori that countries with relatively low carbon intensities post-
recession will have a declining trend for emissions. Figure 6 shows all the different pos-
sibilities related to trends in emissions associated with this set of countries; these possi-
bilities relate to trends in two other variables that further define country clustering. The
first variable is the post-recession slope of Gini that distinguishes between countries with
increasing per capita emissions and those with decreasing and stabilizing trajectories
(Node 2). Among the developed countries, the split in the slope of Gini separates Japan
with stabilizing Gini and increasing emissions, from other rich countries including most
western European countries (e.g., Austria, Denmark, Finland, and France) and New Zea-
land with declining Gini and declining emissions. The second variable is the pre-recession
slope of GDP growth that splits Cluster 3 (Costa Rica), with a relatively higher slope of
GDP growth rate (i.e., slope > 0.135) and stabilizing emissions, from Cluster 4 countries
with a lower (but still positive) slope of GDP growth and decreasing emissions. Overall,
these results show that even among countries whose economic structure in the post-reces-
sion period was associated with low carbon intensities, multiple types of emissions trajec-
tories were observed—increasing, stabilizing, and decreasing—depending upon their post-
recession inequality and pre-recession economic growth trends.

4.2 Pathways for countries with relatively high carbon intensity

For countries with relatively high carbon intensities (i.e., above 40.6 Kiloton C­ O2 per billion
US$), the change in GDP growth rate (both pre-and post-recessions) explains subsequent clus-
tering in the top three levels of CART (Node 3, 4, 5), followed by the variability of GDP
growth (Node 6). Next, the pre-recession trends in emissions (Node 7) distinguish country
clusters. Countries on the left branch of Node 7 are further differentiated based on their carbon

13
 D. B. Agusdinata et al.

intensity post-recession (Node 8). Countries on the right branch of node 7 are further differ-
entiated by the pre-recession trend in inequality (Node 9) and lastly by the variability of the
pre-recession GDP growth rate (Node 10).
The first division for the high-carbon-intensity countries (Node 3) is based on the post-
recession GDP growth slope, with a split slope value of 2.55. The countries that accelerated
their economic growth rate (slope ≥ 2.55) belong to Cluster 2 with stabilizing emissions. This
cluster consists of three former Soviet-bloc countries: Armenia, Latvia, and Lithuania. On the
other end of this branch, in Cluster 5 are countries whose economic growth rate declined at a
rate below 0.33 per year in the post-recession period but show an increasing emission trend
(i.e., Cluster 5: Argentina, Belarus, Brazil, China, India, and Uruguay). These are high carbon
intensity countries with a long legacy of high and increasing growth rates in the pre-recession
period, which even after growth slowed down considerably, were unable to bring down their
carbon emissions.
Similarly, under Node 5, countries in Cluster 6 also have an increasing emission trend. The
countries here include some Southeast Asian economies (Indonesia, Malaysia, Singapore, and
Thailand) as well as some European countries like Germany and Estonia with high carbon
intensities. A major difference between countries in Cluster 5 and Cluster 6 is that in the for-
mer, the GDP growth rates were high and increasing in pre-recession period, but declining
later, whereas in the latter, the GDP growth rates were declining in the pre-recession period
but growth performance improved (except for Singapore) in the post-recession period. For
both these clusters of high carbon intensity countries, despite their varied growth experiences,
carbon emissions in the post-recession period have increased.
Next, the variability of GDP growth post-recession defines the pathways in different
ways (Node 6). Countries with relatively high GDP growth variability (i.e., standard devia-
tion ≥ 3.97) belong to country Cluster 7, which includes Turkey, Russia, and some former
Soviet bloc countries (Moldova, Kyrgyzstan, and Georgia). It is worth noting that these coun-
tries with high growth variability are associated with an increasing trajectory of emissions.
For countries with lower growth variability (left branch of Node 6), the picture is more com-
plicated with clusters of increasing, stabilizing, and decreasing emissions trajectory as we dis-
cuss next.
For countries with low growth variability (left branch of Node 6), the first differentiator is
pre-recession carbon emissions. Countries with lower than the threshold level are further split
up in Node 8, with the level of carbon intensity post-recession distinguishing among countries
with decreasing (e.g., Belgium, Czech Republic, and Hungary) and stabilizing (i.e., Tajikistan)
emissions. Those with higher than the threshold level of pre-recession carbon emissions (right
branch of node 7) are split in Node 9, based on the pre-recession inequality trend. Countries
with the Gini slope below 0.07 belong to Cluster 10 that includes Greece, Jordan, Slovenia,
and the USA, all of which have decreasing emissions.
On the opposite side, fifteen countries with increasing inequalities (Gini slope ≥ 0.07) are
split further based on GDP growth variability. Those with standard deviation of post-recession
growth below 2.05 experienced a decreasing emissions trend (Cluster 11: Australia, Israel,
and South Africa), whereas those with higher variability experienced an increasing emis-
sions trend (Cluster 12: Canada, Chile, Ecuador, Dominican Republic, Panama, Peru and Sri
Lanka).

13
Economic growth, inequality, and environment nexus: using…

4.3 Cluster‑based analysis of archetype pathways: Decreasing, stabilizing,

and increasing trajectories of post‑recession emissions

In contrast to previous studies which have used parametric methods to characterize a single
development pathway as the best fit to the underlying data, the use of the CART method in
this study has revealed 12 different clusters of countries, which can be used as the basis for
characterizing distinct archetypes of development pathways. We characterize each of these
archetype pathways in terms of a distinct configuration of trends in explanatory variables
used in our model. To visualize these complex configurations of trends in a simple but
effective way, we have plotted the average value of each explanatory variable in the pre-
and post-recession period and connected them with a line to show the trend. Positive slope
of this trend line indicates acceleration, whereas negative slope indicates deceleration. In
the ensuing three subsections, we discuss these archetype pathways under three broad cat-
egories depending on the trend in the dependent variable in our CART model: decreasing,
stabilizing, and increasing trajectory of post-recession emissions.

4.3.1 Archetype pathways with decreasing trajectory of post‑recession emissions

In this subsection, we discuss four unique archetype pathways with a decreasing trajectory
of post-recession emissions (Fig.  8). The first archetype, exemplified by Cluster 3 in our
analysis, is characterized by low carbon intensity, acceleration of economic growth post-
recession with relatively low but increasing variability, and a declining trend in inequality.
While the trajectory of emissions had begun to stabilize in the pre-recession period in this
cluster, it declined during the post-recession period. All Scandinavian countries, several
Western European (except notably Germany), and New Zealand belong to this archetype.
Clusters 8, 10, and 11 represent countries that had relatively high carbon intensities in
the pre-recession period but have declining trends in emissions post-recession. A shared

Fig. 8  Country clusters with decreasing post-recession emissions. Note The following countries are mis-
classified: Vietnam, Bolivia, and Colombia (Cluster 11). These countries share similar characteristics of
independent variables as others in the cluster but were observed to have increasing emissions trends

13
 D. B. Agusdinata et al.

feature among all these clusters is their increasing trend in inequality in the pre-recession
period followed with a non-increasing trend post-recession, and growth rates accelerating
in the post-recession period (except for Poland and Jordan).
In summary, the countries with declining trends in per capita carbon emissions post-
recession exhibit a lot of diversity: Some are characterized by low carbon intensity, while
others have high carbon intensity. Their growth experiences also vary across clusters. Two
enabling trends these clusters share in common include: (1) these countries were already
on a path of declining carbon emissions in the pre-recession period which continued post-
recession and (2) these countries had a reversal in the trend of Gini: from increasing (or
stabilizing) in the pre-recession period to decreasing in the post-recession period.

4.3.2 Analysis of country clusters with stabilizing trajectory of ­CO2 emissions

Three clusters can be distinguished that show stabilizing post-recession emissions (Fig. 9).
Three former communist-bloc countries (i.e., Armenia, Latvia, and Lithuania) constitute
one of these clusters (Cluster 2), which is characterized by high and increasing carbon
intensity and accelerating (and relatively high variability) economic growth. Costa Rica
is identified by its own cluster (Cluster 4) with similar characteristics, except that Costa
Rica had a much lower carbon intensity in the pre-recession period and had stabilized its
emissions in the pre-recession period itself. In both clusters, there was an acceleration in
economic growth rate (albeit at a slower rate for Costa Rica) while the trend in Gini flipped
to decreasing in the post-recession period. Lastly, Tajikistan is also identified as a cluster of
its own (Cluster 9) in which carbon intensity has increased significantly, growth continues
to accelerate albeit at a slower pace post-recession, along with a sharp decrease in GDP
growth volatility, and a declining trend in Gini.

4.3.3 Analysis of country clusters with increasing trajectory of CO2 emissions

Figure  10 shows the five clusters that have an increasing trend of post-recession emis-
sions. Most countries in these clusters had accelerated their economic growth post-reces-
sion, with the exception of all the countries in Cluster 5, and two countries each in Cluster

Fig. 9  Country clusters with stabilizing post-recession emissions

13
Economic growth, inequality, and environment nexus: using…

Fig. 10  Country clusters with increasing post-recession emissions. Note Misclassified countries include
Pakistan (Cluster 6), Ukraine (Cluster 7), and Croatia and Honduras (Cluster 12)

6 (Indonesia and Singapore) and Cluster 12 (Sri Lanka and Peru), which had very high
growth rates in the pre-recession period followed with a slight slowdown during the post-
recession period. Most of these countries had decelerating income inequality, except for
India (Cluster 5), Turkey (Cluster 7), and Sri Lanka (Cluster 12). Our in-depth analysis
of the different categories of emission trajectories points to some interesting commonali-
ties among clusters in each category coupled with subtle nuances (often linked to legacy
effects) in each category, thus confirming the point made earlier about the complexity and
diversity in experiences across countries.

4.4 Robustness analysis

We tested the robustness of our results using three alternative model formulations, esti-
mated using the same CART method. The first alternative model (Alt-1) contains all the
variables except for the variability of GDP growth rate (SI, eq.S1-2). This model assumes
that the volatility of economic growth does not affect emissions trajectories. The second
alternative model (Alt-2) contains all the variables in the Alt-1 model except for the carbon
intensity of GDP (SI, eq. S3–4). This was the first specification we tried to capture the pure
growth-inequality-environment relationship, without controlling for energy infrastructure
legacy that could potentially be influencing economic growth and carbon emissions. The
third model (Alt-3) includes countries’ absolute GDP per capita in addition to the GDP
growth slope (SI, eq. S5-6). This formulation was estimated to control for the scale effect
and explore how the size of the economy may impact the growth-inequality-environment
relationship.
The Alt-1 model results in 12 country clusters: two stabilizing, four decreasing, and
six clusters with increasing trajectories of emissions. In the Alt-2 model, we identified 12

13
 D. B. Agusdinata et al.

clusters: two stabilizing, three decreasing, and seven increasing carbon emissions trajec-
tories. The Alt-3 model results in nine clusters: three stabilizing, two decreasing, and four
increasing carbon emissions trajectories. Despite a variation in the number of clusters, we
found our key results to be fairly robust across the different models. For instance, across all
the models, although clusters with a declining trajectory of emissions are quite heterogene-
ous, they share one common feature: a declining trend in Gini in the post-recession period.
Furthermore, as expected, all the two models also group the Scandinavian and several West
European countries (except for Germany) in one cluster with declining emissions. While
these countries are generally regarded as exemplary cases of sustainable development, our
methodology has helped identify a few other clusters with declining trends of emissions,
which exemplify alternative pathways for sustainable development.
Lastly, in all the three models we found clusters with an increasing trend in growth but
declining emissions, thus negating the commonly held presumption that the declining tra-
jectory of carbon emissions is incompatible with economic growth. Similarly, our results
also show that it is not necessarily true that a slowdown in economic growth would lead
to a declining trajectory of carbon emissions. Across all our models, there are clusters,
which show an increasing trajectory of carbon emissions even with a declining economic
growth trajectory. A prime example here is cluster 5 in our main specification (Cluster 1 in
Alt-1) consisting of countries like Argentina, Brazil, Belarus, China, India, and Uruguay
where growth is on a declining trajectory in the post-recession period but emissions are on
an increasing trajectory, possibly because of a legacy of high carbon intensity. The com-
plete results in terms of classification tree, performance, and cluster characterizations can
be found in the SI (Figure S1-3 and Table S14-16).

5 Conclusions and policy implications

Achieving the UN Sustainable Development Goals requires a holistic understanding of the

interconnections between the different goals that can lead to informed policymaking. This
study investigated the linkages between three goals: economic growth (SDG 8), reduced
inequalities (SDG 10), and climate action (SDG 13). Our review of previous studies on
these linkages showed that the assumption of convergence that leads to the idea of a single
curve (such as the EKC) to represent diverse experiences could be potentially misleading.
Instead of going to the other extreme of conducting country-specific studies, which provide
rich contextual detail but not much guidance on transferability of lessons across cases, we
used data mining methods to reveal 12 archetypes of country development pathways. These
archetypes offer policymakers a richer menu of possibilities related to sustainability tran-
sitions that they can choose from based on their specific contexts than has been possible
through previous parametric empirical approaches that have focused on estimating a single
best-fit path.
Using the nonparametric CART method, our work shows which variables are most
important, and in what sequence, in explaining the cross-country variation in carbon emis-
sions observed in the post-recession period. We found post-recession carbon intensity to
be the most important variable that explains this variation. The classification tree we esti-
mated distinguishes among countries with carbon intensity lower than the threshold value
of 40.6 (17 countries, ~ 24% of total) and others. For all the countries (except Japan and
Costa Rica) with carbon intensity below this threshold level, post-recession carbon emis-
sions were found to be on a declining trajectory. Japan’s case is distinguished from the

13
Economic growth, inequality, and environment nexus: using…

others in this group because of its increasing trajectory of post-recession carbon emissions
and a higher rate of increase in inequality than others. Costa Rica is another important
exception in this group with stabilizing emissions in the post-recession period and a legacy
of a much higher growth record than others in the group. These results highlight the critical
role of carbon intensity in determining the trajectory of carbon emissions, while also point-
ing to the importance of paying attention to trends in inequality and GDP growth rates as
factors that can potentially dilute this impact.
For the other, roughly three-quarters of the countries in the sample with higher post-
recession carbon intensities than the threshold, the classification tree reveals nine arche-
types of development pathways: four with increasing, two with stabilizing, and three with
decreasing trajectories of post-recession carbon emissions. The presence of three arche-
types of decreasing trajectory of emissions, even among this set of countries with rela-
tively high carbon intensities, is worth noting. These archetypes are associated with addi-
tional conditions on growth trends, variation in growth, pre-recession carbon emissions,
and carbon intensity (Cluster 8), and also pre-recession Gini (Clusters 10 and 11). These
results unravel the underlying complexities and nuances of development pathways in ways
that have not been explored previously because of the use of pre-determined and inflexible
functional forms.

5.1 Policy implications

These findings point to a wide set of policy options available to policymakers who might
be interested in transitioning to a trajectory of declining carbon emissions. For instance,
one option might be to reduce carbon intensity, through one or more of its constituent ele-
ments: energy intensity (which in turn depends on energy efficiency, share of manufactur-
ing, and trade composition) and fuel mix. As part of their climate policy, several coun-
tries have set targets for energy efficiency and promoted the achievement of these targets
through technology transfers and tax incentives (Baumert et al. 2005). Similarly, fuel mix
can be influenced through phased removal of subsidies on fossil fuels and the promotion of
renewable energy sources and clean technologies such as electric vehicles. The share of the
pollution-intensive manufacturing sector is expected to decline in the process of economic
development as the share of the services sector increases. This process can be accelerated
through special design of policies that provide tax benefits for investments and training
of the workforce in emerging service industries (such as Information and Communication
Technology, ICT). In cases where carbon intensity is very high and difficult to change, a
slowdown in GDP growth per capita is one potential option. This option was considered
unthinkable by most policymakers until the recession of 2008, when several well-known
economists started talking about secular stagnation as the “new normal” (Stiglitz 2009;
Summers 2014; Jackson 2017, 2018). Our model also indicates that in addition to eco-
nomic growth, the variability of economic growth is a determining factor affecting the
emissions pathway. Too much volatility in economic growth can deter long-term invest-
ments in energy efficiency and renewable energy sources.
Overall our work shows how past development pathways of countries around the world
embody important lessons that can be leveraged for future policymaking. In this regard, a
noteworthy and fairly robust result of our analysis is that all the archetypes with a declining
trajectory of post-recession emissions are characterized by a declining trajectory of ine-
quality. As Stiglitz (2016) has argued, reducing inequality is not just a moral issue but also
an efficiency and environmental issue that needs to be addressed through measures such

13
 D. B. Agusdinata et al.

as changes in tax codes, enhanced corporate transparency, increase in the minimum wage,
increased investment in public infrastructure, and better access to financial and health care
services.
Within each archetype, we find recurrent patterns of relationships that could be interest-
ing to investigate further in future studies. One potential avenue of future research could
be investigating deeper into the contextual details of each archetype and deriving context-
specific generalizations for building global narratives for the SDGs. Our study takes the
first step toward bridging the gap between local realities and global narratives through the
delineation of these archetypes. It is worth noting that the archetypes we derived from the
CART method do not impose any a priori conditions on the algorithm, yet some of them
come close to the archetypes in popular usage, such as the Asian development pathway or
the Scandinavian development pathway. This suggests that the intuition behind the regional
groups may be correct in some cases and can be used to generalize lessons to some extent
within a region. However, this generalization is not true for all regions, and future studies
could investigate deeper into the complex patterns of multiple conditions (beyond regional
groupings) that characterize the long-term development pathways of these countries. Fur-
ther research is also needed to assess the role of other factors such as education, institu-
tions, health, gender equality, demographics, and innovations.

Acknowledgements  The authors would like to thank two anonymous reviewers for their valuable comments.

References
Ahluwalia, M. S. (1976). Income distribution and development: Some stylized facts. The American Eco-
nomic Review, 66(2), 128–135.
Anand, S., & Kanbur, S. R. (1993). Inequality and development a critique. Journal of Development Eco-
nomics, 41(1), 19–43.
Andrée, B. P. J., Spencer, P. G., Chamorro, A., & Dogo, H. (2019). Environment and development:
Penalized nonparametric inference of global trends in deforestation, pollution and carbon. In: Pol-
icy Research working paper; no. WPS 8756. Washington, DC: World Bank Group. https​://doi.
org/10.1596/1813-9450-8756.
Baek, J., & Gweisah, G. (2013). Does income inequality harm the environment? Empirical evidence from
the United States. Energy Policy, 62, 1434–1437.
Baloch, A., Shah, S. Z., Noor, Z. M., & Magsi, H. B. (2018). The nexus between income inequality, eco-
nomic growth and environmental degradation in Pakistan. GeoJournal, 83(2), 207–222. https​://doi.
org/10.1007/s1070​8-016-9766-3.
Banerjee, A. V., & Duflo, E. (2003). Inequality and growth: What can the data say? Journal of Economic
Growth, 8(3), 267–299.
Barro, R. J. (2000). Inequality and growth in a panel of countries. Journal of Economic Growth, 5(1), 5–32.
Barro, R. J. (2008). Inequality and growth revisited. Working Papers on Regional Economic Integration 11,
Volume Asian Development Bank.
Baumert, K. A., Herzog, T., & Pershing, J. (2005). Navigating the numbers: Greenhouse gas data and inter-
national climate policy. Washington, D.C: World Resources Institute.
Berthe, A., & Elie, L. (2015). Mechanisms explaining the impact of economic inequality on environmental
deterioration. Ecological Economics, 116, 191–200. https​://doi.org/10.1016/j.ecole​con.2015.04.026.
Breiman, L., Friedman, J. H., Olshen, C. J., & Stone, C. J. (1984). Classification and regression trees. Mon-
terey: Wadsworth.
Clark, W. C., van Kerkhoff, L., Lebel, L., & Gallopin, G. C. (2016). Crafting usable knowledge for sustain-
able development. Proceedings of the National Academy of Sciences of the United States of America,
113(17), 4570–4578. https​://doi.org/10.1073/pnas.16012​66113​.
Cole, M. A., Rayner, A. J., & Bates, J. M. (1997). The environmental Kuznets curve: An empirical analysis.
Environmental and Development Economics, 2(4), 401–416.
Cushing, L., Morello-Frosch, R., Wander, M., & Pastor, M. (2015). The Haves, the Have-Nots, and the
health of everyone: The relationship between social inequality and environmental quality. Annual

13
Economic growth, inequality, and environment nexus: using…

Review of Public Health, 36(36), 193–209. https​://doi.org/10.1146/annur​ev-publh​ealth​-03191​4-12264​

6.
De Bruyn, S. M., van den Bergh, J. C. J. M., & Opschoor, J. B. (1998). Economic growth and emissions:
Reconsidering the empirical basis of Environmental Kuznets Curves. Ecological Economics, 25(2),
161–175.
Diffenbaugh, N. S., & Burke, M. (2019). Global warming has increased global economic inequality. Pro-
ceedings of the National Academy of Sciences of the United States of America, 116(20), 9808–9813.
https​://doi.org/10.1073/pnas.18160​20116​.
Dollar, D., Kleineberg, T., & Kraay, A. (2013). Growth still is good for the poor. Policy Research working
paper # WPS 6568. Washington, D.C. : World Bank Group. http://docum​ents.world​bank.org/curat​ed/
en/49612​14681​49676​299/Growt​h-still​-is-good-for-the-poor.
Duraiappah, A. K., Naeem, S., Agardy, T., Ash, N. J., Cooper, H. D., Diaz, S., et al. (2005). Ecosystems and
human well-being: biodiversity synthesis; a report of the Millennium Ecosystem Assessment.
Eriksson, C., & Persson, J. (2003). Economic growth, inequality, democratization, and the environment.
Environmental & Resource Economics, 25(1), 1–16. https​://doi.org/10.1023/a:10236​58725​021.
Forster, M., Chen, W., & Llenanozal, A. (2011). Divided we stand: Why inequality keeps rising. Paris:
OECD Paris.
Friedl, B., & Getzner, M. (2003). Determinants of CO2 emissions in a small open economy. Ecological
Economics, 45(1), 133–148.
Grossman, G. M., & Krueger, A. B. (1991). Environmental impacts of a North American free trade agree-
ment. https​://www.nber.org/paper​s/w3914​. Accessed 01 May 2020.
Grunewald, N., Klasen, S., Martínez-Zarzoso, I., & Muris, C. (2017). The trade-off between income ine-
quality and carbon dioxide emissions. Ecological Economics, 142, 249–256. https​://doi.org/10.1016/j.
ecole​con.2017.06.034.
Hardoon, D., Fuentes-Nieva, R., & Ayele, S. (2016). An Economy for the 1%: How privilege and power in
the economy drive extreme inequality and how this can be stopped. Nairobi: Oxfam International.
Hill, R. J., & Magnani, E. (2002). An exploration of the conceptual and empirical basis of the environmental
Kuznets curve. Australian Economic Papers, 41(2), 239–254.
Holtz-Eakin, D., & Selden, T. M. (1995). Stoking the fires? CO2 emissions and economic growth. Journal
of public economics, 57(1), 85–101.
Jackson, T. (2017). Prosperity without growth – foundations for the economy of tomorrow. London:
Routledge.
Jackson, T. The post-growth challenge: Secular stagnation, inequality and the limits to growth. Centre for
the Understanding of Sustainable Prosperity Working Paper No 12.
Jager, J., Rounsevell, M., Harrison, P., Omann, I., Dunford, R., Kammerlander, M., et al. (2015). Assess-
ing policy robustness of climate change adaptation measures across sectors and scenarios. Climatic
Change, 128(3–4), 395–407. https​://doi.org/10.1007/s1058​4-014-1240-y.
Kaldor, N. (1957). A model of economic growth. The Economic Journal, 67(268), 591–624.
Kanbur, R., Rhee, C., & Zhuang, J. (2014). Inequality in Asia and the Pacific: Trends, drivers, and policy
implications. London: Routledge.
Kaplan, R. (2013). Obama: Income inequality ‘The Defining Challenge of Our Time.’. CBS News. Accessed
31 May 2019.
Kondaveeti, A. (2012). Spatio-temporal data mining to detect changes and clusters in trajectories. Ph.D.
Dissertation, Arizona State University. https​://repos​itory​.asu.edu/items​/15907​. Accessed 30 May 2019.
Kuznets, S. (1955). Economic growth and income inequality. The American Economic Review, 45(1), 1–28.
Lantz, V., & Feng, Q. (2006). Assessing income, population and technology impacts on CO2 emissions in
Canada: Where’s the EKC? Ecological Economics, 57(2), 229–238.
Levers, C., Müller, D., Erb, K., Haberl, H., Jepsen, M. R., Metzger, M. J., et al. (2018). Archetypical pat-
terns and trajectories of land systems in Europe. Regional Environmental Change, 18(3), 715–732.
https​://doi.org/10.1007/s1011​3-015-0907-x.
Oberlack, C., Sietz, D., Bürgi Bonanomi, E., de Bremond, A., Dell’Angelo, J., Eisenack, K., et al. (2019).
Archetype analysis in sustainability research: Meanings, motivations, and evidence-based policy mak-
ing. Ecology and Society, 24(2), art26. https​://doi.org/10.5751/ES-10747​-24022​6.
Organisation for Economic Co‐operation and Development, OECD. (2014). Rising inequality: Youth and
poor fall further behind. In: OECD-Directorate for Employment, Labour and Social Affairs París.
Ota, T. (2017). Economic growth, income inequality and environment: Assessing the applicability of the
Kuznets hypotheses to Asia. Palgrave Communications. https​://doi.org/10.1057/palco​mms.2017.69.
Panayotou, T. (1997). Demystifying the environmental Kuznets curve: Turning a black box into a policy
tool. Environment and Development Economics, 2(4), 465–484. https​://doi.org/10.1017/S1355​770X9​
70002​59.

13
 D. B. Agusdinata et al.

Perotti, R. (1996). Growth, income distribution, and democracy: What the data say. Journal of Economic
Growth, 1(2), 149–187.
Piketty, T., & Saez, E. (2014). Inequality in the long run. Science, 344(6186), 838–843.
Rostow, W. W. (1956). THE take-off into self-sustained growtH. Economic Journal, 66(261), 25–48. https​://
doi.org/10.2307/22274​01.
Saith, A. (1983). Development and distribution: A critique of the cross-country U-hypothesis. Journal of
Development Economics, 13(3), 367–382.
Shafik, N. (1994). Economic development and environmental quality: An econometric analysis. Oxford Eco-
nomic Papers; 46, Oct. Special Issue on Environmental Economics (pp. 757–773).
Shafik, N., & Bandyopadhyay, S. (1992). Time Series and cross-country evidence. World Bank Policy
Research Working Paper, WPS 904, Washington, D.C.
Sietz, D., Ordonez, J. C., Kok, M. T. J., Janssen, P., Hilderink, H. B. M., Tittonell, P., et al. (2017). Nested
archetypes of vulnerability in African drylands: Where lies potential for sustainable agricultural inten-
sification? Environmental Research Letters. https​://doi.org/10.1088/1748-9326/aa768​b.
Steffen, W., Grinevald, J., Crutzen, P., & McNeill, J. (2011). The Anthropocene: Conceptual and historical
perspectives. Philosophical Transactions of the Royal Society, 369, 842–867. https​://doi.org/10.1098/
rsta.2010.0327.
Stern, D. I., Common, M. S., & Barbier, E. B. (1996). Economic growth and environmental degrada-
tion: The environmental Kuznets curve and sustainable development. World Development, 24(7),
1151–1160.
Stiglitz, J. (2009). GDP Fetishism. Project Syndicate. https​://www.proje​ct-syndi​cate.org/comme​ntary​/gdp-
fetis​hism.
Stiglitz, J. E. (2012). The price of inequality: How today’s divided society endangers our future. New York:
WW Norton and Company.
Stiglitz, J. E. (2016). Rewriting the rules of the American economy: An agenda for growth and shared pros-
perity (1st ed.). New York: W. W. Norton & Company.
Stocker, T. F., Qin, D., Plattner, G.-K., Tignor, M., Allen, S. K., Boschung, J., et al. (2013). Climate change
2013: The physical science basis. Cambridge: Cambridge University Press.
Summers, L. (2014). U.S. economic prospects: Secular stagnation, hysteresis, and the zero lower bound.
Business Economics, 49(2), 66–73.
The Shift project. (2019). Carbon intensity of GDP. www.tsp-data-porta​l.org/Carbo​n-Inten​sity-of-GDP.
Accessed 01 March 2019.
Timofeev, R. (2004). Classification and regression trees (CART) theory and applications. Berlin: Humboldt
University.
Torras, M., & Boyce, J. K. (1998). Income, inequality, and pollution: A reassessment of the environmental
Kuznets curve. Ecological Economics, 25(2), 147–160.
Tucker, M. (1995). Carbon dioxide emissions and global GDP. Ecological Economics, 15(3), 215–223.
United Nations. (2015). Transforming our world: The 2030 agenda for sustainable development. Resolution
adopted by the General Assembly. Accessed 15 Jan 2017.
UNU-WIDER. (2018). United Nations University-World Institute for Development Economics Research.
World Income Inequality Database. https​://www.wider​.unu.edu/proje​ct/wiid-world​-incom​e-inequ​ality​
-datab​ase. Accessed 10 Sept 2018.
Visbeck, M., & Ringler, C. (2016). A draft framework for understanding SDG interactions. Paris:
International.
Wolde-Rufael, Y., & Idowu, S. (2017). Income distribution and CO2 emission: A comparative analysis for
China and India. Renewable and Sustainable Energy Reviews, 74, 1336–1345.
Wu, X. D., Kumar, V., Quinlan, J. R., Ghosh, J., Yang, Q., Motoda, H., et al. (2008). Top 10 algorithms
in data mining. Knowledge and Information Systems, 14(1), 1–37. https​://doi.org/10.1007/s1011​
5-007-0114-2.

Publisher’s Note  Springer Nature remains neutral with regard to jurisdictional claims in published maps and
institutional affiliations.

13
Economic growth, inequality, and environment nexus: using…

Affiliations

Datu Buyung Agusdinata1   · Rimjhim Aggarwal1 · Xiaosu Ding2

Rimjhim Aggarwal
Rimjhim.Aggarwal@asu.edu
Xiaosu Ding
ding277@purdue.edu
1
School of Sustainability, Arizona State University, 800 S. Cady Mall, Tempe, AZ 85287, USA
2
Lyles School of Civil Engineering, Purdue University, 550 Stadium Mall Drive, West Lafayette,
IN 47907, USA

13