Economic Growth and Income Inequality in Malaysia, 1971–95

This article investigates trends in income inequality in Malaysia for the period 1970–95 based on published aggregated household income data, and places these trends within the broader economic policy framework of the period. An important issue addressed here is the extent to which the observed trends in income inequality can be linked directly to the different policies implemented by the government. This study shows that general development policies implemented under the New Economic Policy have had a major impact on reducing income inequality in Malaysia from the late 1970s. However, since 1990 there is a trend towards rising income inequality, both overall and with inter-ethnic as well as urban-rural income disparities. It is suggested that the government policy reversal towards liberalization, deregulation and privatization since the late 1980s has contributed to this trend of increasing inequality.