Inequality and Determinants of Earning in Malaysia, 1984-97

Asian Development Bank Working Paper

38 Pages Posted: 14 Apr 2005

See all articles by Branko Milanovic

Branko Milanovic

World Bank - Development Research Group (DECRG); University of Maryland

Date Written: May 2001

Abstract

Using the large nationally-representative Malaysian Household Income Surveys from 1984, 1989 and 1997, the paper studies earnings inequality and determinants of earnings. During the period 1984-97, Malaysia's real per capita GDP increased by about 70 percent, participation rates for both men and women went up among all age groups and the average number of years of schooling increased by 1.2 years. Inequality of earnings, measured by the Gini coefficient, remained stable, but other measures of inequality (like decile ratios) show a significant relative wage improvement among the bottom deciles, and relative wage decrease on the top. The inter-state earning differences shrunk between 1984 and 1989 (a period of slow growth which includes the 1985-86 recession) and increased in the latter period. The rate of return to an additional year of schooling remained high (at 10 percent) despite the huge increase in the supply of the highly educated. The stable overall rate though masks an increased rate of return on women's education, and a decreased rate for men. Women wage "discrimination" nevertheless amounts to 16-20 percent, and the bias has recently increased. The pro-Chinese earning ethnic bias is estimated at 31 percent.

Keywords: Labor, inequality, education, Malaysia

JEL Classification: J21, J31, J7, O12

Suggested Citation

Milanovic, Branko, Inequality and Determinants of Earning in Malaysia, 1984-97 (May 2001). Asian Development Bank Working Paper, Available at SSRN: https://ssrn.com/abstract=693161 or http://dx.doi.org/10.2139/ssrn.693161

Branko Milanovic (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

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HOME PAGE: http://econ.worldbank.org/staff/bmilanovic

University of Maryland ( email )

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College Park, MD 20742
United States

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