Household Income Gap: Evidence from Malaysia

Equitable growth is a necessary part of socioeconomic development and household income is a part of that socioeconomic dimension. Malaysian household is categorized into three groups of households, which is the bottom 40%, middle 40%, and top 20%. These groups are a cut-off points of the household income levels for the 7.3 million households in 2019. Furthermore, the household income gap between these three groups has increased over the past 20 years. Household income gap adverse consequences led to several disadvantages and distortion such as, slow and weak economic growth, social conflict, vulnerable to depression, undercuts the progress in education and health, raise economic and political instability that reduces investment. Purpose – The purpose of this paper is to conduct an empirical analysis on how physical capital, human capital, technological progress, and education spending affecting household income gap in 13 Malaysian states and 3 federal territories