A Literature Review on the Trends and Implications of Economic Shocks on Income Inequality in Malaysia

Income inequality has been a major issue globally in recent decades, both in developing and developed countries. This economic problem occurs when the income distribution is not evenly distributed across households or society. High levels of inequality may dampen economic development and lead to social unrest and poverty. In most developing countries, Malaysia is no exception, especially since the income inequality between states or regions has widened over time due to several economic variables’ impact. Despite the widening income inequality, there is limited empirical evidence on how these economic shocks affect income inequality. Therefore, this study is presented to examine the patterns and the implications of economic shocks on income inequality in Malaysia through a narrative review. This paper begins by providing an overview of past studies, and empirical findings on income inequality and economic shocks. By analyzing these consequences of economic shocks, this study may provide a nuanced perspective on the contribution to mitigate the adverse impact of income inequality and help to boost economic growth. The findings from these narratives review will provide insight into the literature gap and recommendations for future direction of studies. Future research should explore other economic variables such as globalization and the immigration of foreign workers to various sectors such as agriculture, manufacturing, and services, which has a significant impact on income inequality. By addressing these gaps, it allows us to understand the drivers and consequences of income inequality from multiple perspectives, leading to a more comprehensive and impactful research to contribute to academic knowledge and policymaking.