The impacts of petroleum price fluctuations on income distribution across ethnic groups in Malaysia

Crude oil price hikes have compelled governments of developing countries to let domestic prices of energy increase. Fiscal priorities made it impossible to fully compensate the hikes by raising energy subsidies. This paper examines the potential impacts of a limited deregulation of the petroleum price on the income distribution in Malaysia, paying specific attention to differences in impacts on major ethnic groups. We introduce an extended social accounting matrix (SAM) model, which not only incorporates substitution possibilities among production inputs and consumption goods, but also allows for the exogenous determination of the price of intermediate inputs. The results of simulations indicate that distributional impacts of rising petroleum prices tend to be regressive, affecting poor people more severely than richer people. All ethnic groups experience income loss with the real incomes of Malay households (which are relatively poor, on average) more than the Chinese and Indian households (which are the generally richer)

The Impact of World Crude Oil Price Changes on the Malaysian Economy: an Input-Output Analysis

By using an input-output model, this paper attempts to examine the economic impact on the Malaysian economy resulting from an increase in crude oil petroleum price. By simulating different levels of crude oil prices, we found that an increase in the world crude oil petroleum price gives more capacity to the economy in generating output and revenue collected by the government in the form of direct and indirect taxes. However, it is very clear that if the crude oil price reaches USD60/barrel, the government will be required to subsidise about RM8.27 of the petrol retail price in order to maintain the current price level. Keywords: Economic impact, input-output analysis, oil price, Malaysian economy JEL classification: C67, E6

Shadow Economy and Financial Sector Development in Malaysia

This paper explores the link between the shadow economy and financial sector development in Malaysia for the period 1971-2013.We calculate the size of the shadow economy by using the modified-cash-deposits-ratio approach recently developed by Pickhardt and Sardia (2011).We investigate the contention made by Blackburn et al.(2012) that financial sector development can mitigate shadow economy – higher level of financial sector development lead to lower level of shadow economy. Our results show that there is a non-linear long-run relationship between shadow economy and financial sector development in Malaysia, an inverted-U shape curve, suggesting that at lower (higher) level of financial sector development commensurate with higher (lower) level of the shadow economy.One policy implication from this study is that the financial sector can play an important role in reducing shadow economy by improving the accessibility to financing and to the credit market

Shadow Economy and Financial Sector Development in Malaysia

This paper explores the link between the shadow economy and financial sector development in Malaysia for the period 1971-2013. We calculate the size of the shadow economy by using the modified-cash-deposits-ratio (MCDR) approach recently developed by Pickhardt and Sardia (2011). We investigate the contention made by Blackburn et al. (2012) that financial sector development can mitigate shadow economy – higher level of financial sector development lead to lower level of shadow economy. Our results show that there is a non-linear long-run relationship between shadow economy and financial sector development in Malaysia, an inverted-U shape curve, suggesting that at lower (higher) level of financial sector development commensurate with higher (lower) level of the shadow economy. One policy implication from this study is that the financial sector can play an important role in reducing shadow economy by improving the accessibility to financing and to the credit market. Keywords: Modified-Cash-Deposit-Ratio, Shadow Economy, Financial Sector Development, Malaysia JEL Classifications: E26, H26, O1

Convergence study for rock unconfined compression test using discrete element method

Mesh convergence is a vital issue that needs to be addressed in a numerical model. This study investigated the effects of mesh element number on the Discrete Element Method (DEM) to granite rock response under compression loading. This study used the 3D finite-element code LS-DYNA to model the Unconfined Compression Test (UCT) numerical simulation. Models with five different mesh types were conducted for convergence mesh, namely normal mesh, fine mesh, super fine mesh, coarse mesh, and super coarse mesh. The mesh convergence of rock media has been conducted using DEM and steel plates simulated using the Finite Element Method (FEM). The DEM-FEM numerical analysis is compared with the results obtained from the experimental test. The best mesh was obtained as the simulation could reproduce the stress-strain curve trends, the failure behaviour and compression strength observed in the experimental test. The normal mesh was selected as the best mesh type in this study based on the comparisons that have been made. This study shows that the DEM-FEM numerical simulation can represent granite rock and can be used for further study based on mesh convergence

Quantifying the impacts of energy price reform on living expenses in Saudi Arabia

As part of ‘Vision 2030’, Saudi Arabia has initiated a broad-based energy reform programme aimed at gradually reducing its dependence on oil. This paper assesses the impacts of energy price reforms on living expenses of various household groups in Saudi Arabia. For this purpose, the input-output table combined with household expenditure data are used to model the impacts. Results show that the distributional impacts of energy price reforms are regressive, with low-income households experiencing a higher increase in living expenses compared to high-income households. The impacts are primarily instigated by rising prices of energy-intensive products. After decomposing the impacts into direct and indirect effects, it was found that indirect effect is not only responsible for a considerable rise in household expenditure on energy-intensive products, but it is also distributionally regressive. It is therefore vital for policymakers to review and fine-tune the social protection system to protect poor households against reforms

Fix- or flex-price behavior? : evidence from the Malaysian manufacturing sector

Industries can be classified into fix-price and flex-price sectors according to their pricing behavior. Although Hicks [1985] and Morishima [1984] have broadly classified manufacturing industries into fix-price and the rest of the economy into flex-price, using the cost-based input-output model, the present paper reclassifies the Malaysian manufacturing industries into fix-price and flex-price categories. By compiling annual sectoral price indices, both for intermediate and primary inputs, the paper found that most of the flex-price manufacturing industries are from non-agro-based industries whereas most of the fix-price industries are from agro-based industries.input-output, fix price, flex price, residual profits

Production interdependencies and poverty reduction across ethnic groups in Malaysia

Production sectors are interdependent and the benefits of output growth for poverty reduction therefore spread over the economy. The role of such interdependencies is explicitly studied in this paper. A social accounting matrix for Malaysia that distinguishes between the major ethnic groups in Malaysia (Malays, Chinese, and Indians) is used to run the analyses. Interdependencies among production sectors are measured by splitting the total output effect into the initial, direct and indirect effects. The results show that sectors which have large (small) spillover effects are associated with lower (higher) poverty reduction. The best way to increase the income of poor workers in a sector, generally is to stimulate that sector rather than other sectors. (C) 2014 Elsevier B.V. All rights reserved

Income Distribution across Ethnic Groups in Malaysia:Results from a New Social Accounting Matrix

A new social accounting matrix is constructed for Malaysia for the year 2000 to analyze sources of income inequality among ethnic groups in Malaysia. The analysis reveals that income inequality can be decomposed into the interaction of: (i) hourly wages; (ii) working hours per week; and (iii) number of dependents per household. The results of the analysis suggest that occupational differences are the main factor contributing to wage inequality in Malaysia. Ethnic Malays tend to work in low-wage industries while ethnic Chinese and Indians are more likely to work in higher-wage industries