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Inequality And Determinants Of Earnings In Malaysia, 1984-97


  • Branko Milanovic

    (World Bank; Carnegie Endowment for International Peace)


Using the large nationally-representative Malaysian Household Income Surveys from 1984, 1989 and 1997, the paper studies earnings inequality and determinants of earnings. During the period 1984-97, Malaysia’s real per capita GDP increased by about 70 percent, participation rates for both men and women went up among all age groups and the average number of years of schooling increased by 1.2 years. Inequality of earnings, measured by the Gini coefficient, remained stable, but other measures of inequality (like decile ratios) show a significant relative wage improvement among the bottom deciles, and relative wage decrease on the top. The inter-state earning differences shrunk between 1984 and 1989 (a period of slow growth which includes the 1985-86 recession) and increased in the latter period. The rate of return to an additional year of schooling remained high (at 10 percent) despite the huge increase in the supply of the highly educated. The stable overall rate though masks an increased rate of return on women’s education, and a decreased rate for men. Women wage “discrimination” nevertheless amounts to 16-20 percent, and the bias has recently increased. The pro-Chinese earning ethnic bias is estimated at 31 percent.

Suggested Citation

  • Branko Milanovic, 2005. "Inequality And Determinants Of Earnings In Malaysia, 1984-97," Development and Comp Systems 0503007, EconWPA.
  • Handle: RePEc:wpa:wuwpdc:0503007
    Note: Type of Document - pdf; pages: 37

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    References listed on IDEAS

    1. Alan B. Krueger & Jorn-Steffen Pischke, 1995. "A Comparative Analysis of East and West German Labor Markets: Before and After Unification," NBER Chapters,in: Differences and Changes in Wage Structures, pages 405-446 National Bureau of Economic Research, Inc.
    2. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
    3. Psacharopoulos, George, 1994. "Returns to investment in education: A global update," World Development, Elsevier, vol. 22(9), pages 1325-1343, September.
    4. repec:fth:prinin:307 is not listed on IDEAS
    5. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-1381, September.
    6. Alwyn Young, 1994. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," NBER Working Papers 4680, National Bureau of Economic Research, Inc.
    7. Cardoso, Ana Rute, 1998. "Earnings Inequality in Portugal: High and Rising?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(3), pages 325-343, September.
    8. Oaxaca, Ronald L. & Ransom, Michael R., 1994. "On discrimination and the decomposition of wage differentials," Journal of Econometrics, Elsevier, vol. 61(1), pages 5-21, March.
    9. Franco Peracchi, 1999. "Earnings Inequality in International Perspective," LIS Working papers 208, LIS Cross-National Data Center in Luxembourg.
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    More about this item

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J7 - Labor and Demographic Economics - - Labor Discrimination
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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