Regional and ethnic inequalities in Malaysian poverty dynamics

Abstract

This study employs a synthetic panel approach based on nationally-representative micro-level data to track poverty and income mobility in Malaysia in the period 2004–2016. On aggregate we observe large reductions in chronic poverty and increases in persistent economic security, but note that those who remain poor in 2016 are increasingly likely to be poor in a structural sense. Further, we find that poverty and income dynamics differ notably across geographic dimensions. Such disparities are most striking when we contrast affluent urban Peninsular Malaysia with poorer rural East Malaysia. Although there are important differences in welfare levels between the main ethnic groups in Malaysia, we observe that mobility trends generally point in the same direction. While our findings show that there is still scope for poverty reduction through the reduction of inter-ethnic inequalities, we underscore the importance of taking regional inequalities into greater account when it comes to ensuring a fairer distribution of socioeconomic opportunities for poor and vulnerable Malaysians. Hence, addressing chronic poverty is likely to require additional attention to less developed geographic areas, as a complement to the largely ethnicity-based policies that have historically played a dominant role.