Asymmetric effects of oil price shocks on income inequality in ASEAN countries

Abstract

Oil price shocks can have a substantial effect on income inequality. This study delves into the interplay between oil price shocks and income inequality in the Association of Southeast Asian Nations (ASEAN) countries, where income inequality is a critical issue. It aims to scrutinize the effects of both changes in oil prices and oil price volatility on income inequality while exploring the possibility of an asymmetric relationship. In addition, this study incorporates both oil-importing and -exporting countries, employing the panel model as well as causality analysis using data from 2000 to 2021. The results show that rises in oil prices increase income inequality in oil-importing economies but decrease it in oil-exporting countries. On the other hand, rises in oil price volatility induce increases in income inequality in both types of countries. The study further discovered that oil price shocks asymmetrically influence income inequality. Overall, oil price shocks tend to have larger adverse than advantageous effects on income inequality in oil-importing and oil-exporting economies.