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The Role Of Financial Development On Income Inequality In Malaysia

  • Siong Hook Law


    (Department of Economics, Universiti Putra Malaysia)

  • Hui Boon Tan

    (University of Nottingham, Malaysia Campus)

This study examines the role of financial development in influencing income inequality in Malaysia over the period of 1980-2000. The empirical results based on ARDL bounds test indicate that financial market development is, at best, very weak and statistically insignificant in reducing income inequality in Malaysia. The evidence is valid for a variety of financial indicators, including the banking sector, the stock market and financial aggregate variables. The evidence also highlights that besides various government¡¯s development programs, efforts should also concentrate on improving institutional quality, economic development and maintaining low inflation in its attempt to combat income inequality.

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Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

Volume (Year): 34 (2009)
Issue (Month): 2 (December)
Pages: 153-168

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Handle: RePEc:jed:journl:v:34:y:2009:i:2:p:153-168
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  1. Mishkin, Frederic S., 2009. "Globalization and financial development," Journal of Development Economics, Elsevier, vol. 89(2), pages 164-169, July.
  2. Manoel F. Meyer Bittencourt, 2006. "Financial Development and Inequality: Brazil 1985-99," Bristol Economics Discussion Papers 06/582, Department of Economics, University of Bristol, UK.
  3. Georg R. G. Clarke & Lixin Colin Xu & Heng-fu Zou, 2006. "Finance and Income Inequality: What Do the Data Tell Us?," Southern Economic Journal, Southern Economic Association, vol. 72(3), pages 578-596, January.
  4. Karla Hoff & Joseph E. Stiglitz, 2002. "After the Big Bang? Obstacles to the Emergence of the Rule of Law in Post-Communist Societies," NBER Working Papers 9282, National Bureau of Economic Research, Inc.
  5. Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Sonin, Konstantin, 2003. "Why the rich may favor poor protection of property rights," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 715-731, December.
  7. Alberto Chong & Mark Gradstein, 2004. "Inequality and Institutions," Research Department Publications 4361, Inter-American Development Bank, Research Department.
  8. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
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