Analysis of inequality in the upper-tail of urban household incomes in Malaysia

Abstract

Income inequality is a matter of concern for any society and an interesting discussion topic, particularly for developing countries, since high-income inequality could be detrimental to economic growth. In Malaysia, upper-income earners are classified as the T20 group. This study analyzes the demographic profile of members of the T20 group living in urban areas in Malaysia. The upper-income distribution is described using the Pareto model, and a robust and efficient estimator called the probability integral transform statistic estimator is utilized to estimate the shape parameter of this model. Thereafter, a Gini index and Lorenz curve are derived to analyze the severity of income inequality among T20 group members.