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How does economic growth impact on income inequality across ethnic groups in Malaysia?

Author

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  • Hasanul Banna
  • Muhammad Mehedi Masud
  • Shamsulbahriah K. A. Rodrigo

Abstract

This study aims to examine the impact of economic growth on income inequality in Malaysia with special attention to the distribution of income among different ethnic groups. Twofold methodologies have been used in this analysis. The primary methodology is descriptive in nature where tables, charts, and diagrams have been extracted from the specific sources for analysis. Second, this paper applies the Granger noncausality test to estimate the causality and also applies the ARDL (autoregressive distributed lag) regression model to see the shot‐run and long‐run dynamic relationship between economic growth and income inequality in the context of Malaysia using the data of 1970–2018 from the household income survey, World Development Indicators, and the Standardized World Income Inequality Database. Additionally, it deploys panel Granger noncausality and dynamic pool mean group regression for the robustness of the results. This study reveals that the income gap among ethnic groups has been narrowed; although, intra‐ethnic income inequality is still very high, especially among Indians. The study further advises that income inequality does not Granger‐cause economic growth; rather, economic growth does Granger‐cause income inequality, and economic growth affects income inequality negatively, regardless of ethnicity, suggesting that economic growth significantly contributes to the reduction of income inequality in Malaysia. The paper concludes with a few policies which could significantly contribute to reducing income inequalities and achieving greater economic development goals, such that Malaysia can become a developed country by 2030. 本文旨在分析经济增长对马来西亚收入不平等产生的影响，尤其聚焦不同族群之间的收入分配。该分析使用了两个方法。主方法的性质是描述性的，将特定来源中的表格和图表进行提取以供分析。第二个方法则是格兰杰非因果检验（Granger non‐causality test）和ARDL 回归模型，前者用于预测因果关系，后者使用从HIS、世界发展指标（WDI） 和世界收入不平等标准化数据库（SWIID）中提取的1970‐2018年的数据，研究马来西亚经济增长与收入不平等之间的短期和长期动态关系。此外，本文还应用面板格兰杰非因果检验（panel Granger non‐causality）和dynamic pool mean group regression来验证结果的稳健性。研究显示，族群之间的收入差距缩小了。然而，族群内的收入不平等程度依然很高，尤其是印度族群。本研究进一步建议，收入不平等并不是经济增长的格兰杰原因，但经济增长是收入不平等的格兰杰原因，并且无论族群性是什么，经济增长都对收入不平等产生消极影响，这暗示经济增长对减少马来西亚的收入不平等具有显著贡献。本文结论提出了一些政策，用于显著减少收入不平等并实现更大的经济发展目标，以期让马来西亚在2030年能成为发达国家。 Este estudio tiene como objetivo examinar el impacto del crecimiento económico en la desigualdad de ingresos en Malasia con especial atención a la distribución de ingresos entre diferentes grupos étnicos. En este análisis se han utilizado las dos metodologías. La metodología principal es de naturaleza descriptiva donde se han extraído tablas, gráficos y diagramas de las fuentes específicas para su análisis. En segundo lugar, este documento aplica la prueba de no causalidad de Granger para estimar la causalidad y también aplica el modelo de regresión ARDL para ver la relación dinámica a largo plazo y a corto plazo entre el crecimiento económico y la desigualdad de ingresos en el contexto de Malasia utilizando los datos de 1970. ‐2018 de HIS, WDI y SWIID. Además, despliega la no causalidad del panel Granger y la regresión del grupo de medias del grupo dinámico para la robustez de los resultados. Este estudio revela que la brecha de ingresos entre los grupos étnicos se ha reducido, sin embargo, la desigualdad de ingresos intraétnica sigue siendo muy alta, especialmente entre los indios. El estudio advierte además que la desigualdad de ingresos no causa el crecimiento económico de Granger, sino que el crecimiento económico causa la desigualdad de ingresos de Granger y el crecimiento económico afecta la desigualdad de ingresos de manera negativa independientemente de la etnia, lo que sugiere que el crecimiento económico tiene una contribución significativa para reducir la desigualdad de ingresos en Malasia. El documento concluye con pocas políticas que podrían contribuir significativamente a reducir las desigualdades de ingresos y lograr mayores objetivos de desarrollo económico para que Malasia pueda convertirse en un país desarrollado para 2030.

Suggested Citation

  • Hasanul Banna & Muhammad Mehedi Masud & Shamsulbahriah K. A. Rodrigo, 2020. "How does economic growth impact on income inequality across ethnic groups in Malaysia?," Poverty & Public Policy, John Wiley & Sons, vol. 12(4), pages 397-420, December.
    • Handle: RePEc:wly:povpop:v:12:y:2020:i:4:p:397-420
    DOI: 10.1002/pop4.293
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