Relationship between poverty and inequality: a case study of Bumiputera household in the Northern States of Malaysia

The relationship between poverty and inequality has never been straightforward. While some research found that poverty does not mirror inequality, others found that a change in income inequality definitely affects poverty. Malaysia has been applauded by international organizations for its success in alleviating poverty. However, inequality as measured by Gini coefficient has only shown a marginal drop from 0.46 in 1992 to 0.43 in 2012. This situation is more apparent when inequality is assessed according to ethnic groups. While the ethnic inequality measure has narrowed, the inequality for the Bumiputeras remains high. The Gini coefficient of the Bumiputeras stands at 0.42 in 2012, a drop of 0.02 from 1992. The Bumiputera, which is literally known as the ‘son of the soil’ is the largest ethnic group in Malaysia. In 2012, there is only 2.2 per cent Bumiputeras living in absolute poverty. This seems a small percentage but pockets of poverty among Bumiputeras remain. At present, there is a lack of research in understanding the relationship between poverty and inequality among the Bumiputeras, particularly in the Northern States of Malaysia. This study assesses the relationship between poverty and inequality of the Bumiputera Household in the Northern States of Malaysia using the Household Income Survey (HIS) data for 2009. A logistic probability function with values of 1 and 0 to represent households living in poverty and household not living in poverty respectively, is employed. Contextual inequality as measured by Theil Index is used as a proxy to inequality. The analysis found that per capita income and education attainment (except for tertiary education) significantly affect poverty. The study found no significant relationship exists between poverty and inequality. This provides an important implication towards policy formulation. Policy to tackle the issues of poverty and inequality need to be addressed separately, rather than pursued simultaneously

Income inequality in the northern states of Malaysia: an analysis of income quintile

Between 1990 and 2010, income inequality in developing countries rose 11 percent. Inequality is perceived as a considerable threat to human development because it reflects unbalanced economic opportunities and affect individual’s well-being. The 2014 UNHDR indicates that twothirds of the world’s population are estimated to receive less than 13 percent of world income, while the richest 1 percent received nearly 15 percent of world income. In the Malaysian scenario the income inequality has improved only marginally. In 17 years from 1992 to 2009, the ratio of the mean income of the top 20 percent to the bottom 40 percent has improved slightly from 7.4 percent to 6.9 percent. Income inequality in Malaysia can be accessed using two measures; the income quintile (top 20 per cent, middle 40 per cent and bottom 40 per cent) and Gini Coefficient. While both measures are computed and updated regularly by EPU (Economic Planning Unit) for the whole country, the same are not done for individual states in Malaysia. The objective of this paper is to examine income inequality in the Northern States by using income quintile approach. Income quintiles are divided into three categories: top 20 percent, middle 40 percent, and bottom 40 percent. The 2009 household income survey reveals that the mean income of the top 20 percent, middle 40 percent, and bottom 40 percent are, RM 7,639, RM 2,862, and RM 1,206 respectively. A big proportion of the Northern States income is concentrated among the top 20 percent of the population. To further understand the situation, analysis by states, strata, and ethnicity is carried out. An interesting finding to note is that Perlis, the poorest state among the group has the highest inequality because a big proportion of the income goes to the richest 20 percent of its population. Rural areas and Bumiputera remain the disadvantaged groups with low mean income

Patterns of income distribution in the Northern States of Malaysia: A life cycle approach

Income distribution can be defined as equality in which income is dealt out among members of a society. Income distribution is measured by how much income is earned by different segments of a population. In Malaysia, a common measure of income distribution is through calculating mean monthly income. The reported mean monthly income uses macroeconomic data segregated into ethnicity, states and urban-rural. At present, there is no income distribution measurement specifically for the Northern States of Malaysia. Therefore this study aims to estimate and identify the patterns of income distribution using different categories of income. The categories of income used are employment income, property income and gross income. This study uses 2009 Household Income Survey (HIS) data where 30 per cent of total observations are used. The findings confirm the LCH theory. There are different peak ages with different categories of income. However, the peak is not as high as proposed by Modigliani and Brumberg (1954). Calculation of mean income of different categories shows that the income from employment takes a large portion of total income

Does Foreign Direct Investment Successfully Lead to Sustainable Development in Singapore?

The role of foreign direct investment (FDI) inflows is tested on three main pillars of sustainable development (SD), which consists of economic growth, income distribution and environmental quality for Singapore. The analysis is performed by using Autoregressive Distributed Lag (ARDL) estimation technique. The sample data is based on annual data, covering the period from 1970 to 2013. The estimated long-run elasticity indicated that FDI inflows not only lead to higher economic growth and better environmental quality but also widen the income disparity in this country, which may disrupt its SD mission. The other two introduced variables that could also play a part as potential drivers for sustainable development (SD) are trade openness (TO) and financial development (FD). Based on the outcomes, TO has also led to higher economic growth and lower environmental degradation. However, this variable does not have significant impact on income distribution for Singapore. As for FD, it is found to have a significant and positive impact on economic growth and also successfully reduce the income inequality problem. On the contrary, this variable does not have any significant relationship with environmental quality, as indicated by carbon dioxide (CO2) emissions. Mixed evidence of a relationship is detected for other macroeconomic variables in the three estimates models. As the income inequality issue has become more serious, it is important for Singaporean policymakers to focus on attracting more foreign investors to invest in various sectors, in the hope that these companies can offer better wages to the local workers and thus improve income distribution in the country. More attention is needed to explore the potential role of TO and FD as drivers for SD in this country

Does Equitable Income Distribution Influence Environmental Quality? Evidence from Developing Countries of ASEAN-4

This paper investigates income distribution-environment nexus in the context of countryspecific time series data from four member states of the Association of South East Asian Nations (ASEAN-4), namely Malaysia, Indonesia, Philippines and Thailand. The short run and long run effects of income inequality, economic growth, domestic investment, trade openness and energy consumption on Carbon Dioxide (CO2 ) emissions were examined by using Autoregressive Distributed Lag (ARDL) estimation. The annual data used in this study covers the period from 1971 to 2013. More equitable income distribution results in better environmental quality for Indonesia and Thailand but leads to a worsening environment in the case of Malaysia. Meanwhile, no significant relationship was detected between income distribution and environmental quality in Philippines. It was also found that domestic investment and energy consumption have beneficial effects on the environmental quality in Indonesia whereas trade openness and the expansion of the economy (GDP) will have a detrimental effect on its environment. However, these variables have shown mixed results in the case of Indonesia, Philippines and Thailand. The main contribution of this study is the introduction of income distribution as a new determinant for environmental qualityfor these ASEAN-4 countries, thus giving new insights for policymakers to propose better policy recommendations on achieving sustainable growth