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Income Inequality, Income Growth and Government Redistribution in Malaysia: What Do We Know in the Long Run?

Author

Listed:
  • Soo Khoon Goh

    (Centre for Policy Research and International Studies, Universiti Sains Malaysia)

  • Koi Nyen Wong

    (Sunway Business School, Sunway University)

  • Kartinah Ayupp

    (Faculty of Economics and Business, University Malaysia Sarawak)

  • You Wah Lai

    (School of Social Sciences, Universiti Sains Malaysia)

Abstract

Malaysia has a good track record of reducing income inequality, especially between ethnic groups. In recent years, increasing attention has been paid to national inequality – notably by targeting the bottom 40% income group while sustaining growth with inclusivity. This paper uses the latest cointegration technique, namely, the augmented autoregressive distributed lag (A-ARDL) to examine the long-run determinants of income inequality in Malaysia. The long-run results suggest that income inequality is negatively driven by real GDP per capita and government redistribution of income. The findings provide some possible policy implications that could reduce income inequality in the long run, in particular, through the enhancement of the quality and skills of the workforce, and the government’s benevolent role by using redistributive instruments such as progressive income tax and cash transfers to low-income groups.

Suggested Citation

  • Soo Khoon Goh & Koi Nyen Wong & Kartinah Ayupp & You Wah Lai, 2023. "Income Inequality, Income Growth and Government Redistribution in Malaysia: What Do We Know in the Long Run?," Malaysian Journal of Economic Studies, Faculty of Business and Economics, University of Malaya & Malaysian Economic Association, vol. 60(1), pages 69-87, January.
    • Handle: RePEc:mjr:journl:v:60:y:2023:i:1:p:69-87
    DOI: 10.22452/MJES.vol60no1.4
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    More about this item

    Keywords

    Income inequality; income growth; redistribution; Malaysia;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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