Abstract
The article aims to solve the problem of unequal income distribution in Malaysia. Income inequality did not change significantly since 1990. Inclusive growth is an alternative way that can help the government overcome the unequal distribution of income. However, there are no measurements or detailed studies conducted in Malaysia. Moreover, the country’s distribution policy for the 2016–2030 period focuses on inclusive economic growth. Based on the above gaps, we constructed the Malaysia Inclusive Index and estimated the income distribution using this new composite index. To construct the index, we applied the Z-score method. We obtained data for this study from the World Development Indicator, Economic Planning Unit, Department of Statistics, Malaysia and annual reports from various ministries. The main research findings show yearon-year growth from 1990 to 2016, indicating that economic growth in Malaysia is increasingly inclusive. Therefore, to achieve inclusive and equitable economic growth in distribution, the government is advised to consider not only fiscal aspects, but also holistic components comprised of education, health, housing and employment of the B40 group (lower class). Simultaneously, the M40 group (middle class) should not be left out. Income distribution factors and the Malaysia Inclusive Index (MII) determinants such as investment, inflation, education and national income should be considered when developing national distribution policies, as these factors are crucial for inclusive growth in Malaysia
Highlights
Various efforts made by the Malaysian government to combat poverty have succeeded and gained international recognition in addressing poverty issues by the United Nation Development Program (UNDP)
This section describes the results of steps in the construction of the Malaysia Inclusive Index
Based on the above objectives and questions, a new measurement in the form of the Malaysia Inclusive Index has been constructed based on six components to measure the level of inclusive growth in Malaysia
Summary
Various efforts made by the Malaysian government to combat poverty have succeeded and gained international recognition in addressing poverty issues by the United Nation Development Program (UNDP). The Malaysian government has made many changes to the country’s development policy by considering the concept of inclusiveness ranging from the New Economic Model, the 10th and 11th Malaysia Plans (10MP and 11MP, respectively) to address the issue of income inequality. Previous studies by Bulman [3], Flaaen [4] and Aiyar [5] found that middle high-income countries such as China, Malaysia and Thailand could no longer move up the ladder of economic growth. This is due to the gap in income distribution that will hinder economic growth. If government policies through income redistribution measures are not on the right track, the middle-income trap will always be the problem in these three countries (Egawa [6])
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