Long Run Relationship between Income Inequality and Economic Growth: Evidence from Malaysia

Abstract

The aim of present study is to investigate the existence of a long run relationship between income inequality and economic growth in Malaysia. The study has employed annual time series data over the period of 1970 up to 2014. This study is conducted by utilizing the Autoregressive Distributive Lag (ARDL) techniques. ARDL bounds testing approach has been used for cointegration and error correction method (ECM). The unit root problem is handled by the use of ADF unit root test. The findings of our analysis are contrasted to the significant association between income inequality and economic growth found by Alesina and Roderick (1994) and by Persson and Tabellini (1994). To the best of our knowledge, this study seems to be a good and unique contribution in literature with reference to Malaysia. This study is one of pioneering attempt that employs ARDL cointegration approach for this income inequality issue in Malaysia.