Nexus between Financial Development and Income Inequality before Pandemic Covid-19: Does Financial Kuznets Curve Exist in Malaysia, Indonesia, Thailand and Philippines?

Abdul Rahim Ridzuan, Shahsuzan Zakaria, Bayu Arie Fianto, Nora Yusma Mohamed Yusoff, Nor Fatimah Che Sulaiman, Mohamad Idham Md Razak, Siswantini Siswantini and Arsiyanti Lestari
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Abdul Rahim Ridzuan: Faculty of Business and Management, Universiti Teknologi MARA, Melaka Campus, Malaysia
Shahsuzan Zakaria: Faculty of Business and Management, Universiti Teknologi MARA, Shah Alam Campus, Malaysia,
Bayu Arie Fianto: Faculty of Economics and Business, Universitas Airlangga, Surabaya, Indonesia,
Nora Yusma Mohamed Yusoff: College of Energy Business and Economics, Universiti Tenaga Nasional, Malaysia
Nor Fatimah Che Sulaiman: School of Social and Economic development, Universiti Malaysia Terengganu, Malaysia
Mohamad Idham Md Razak: Faculty of Business and Management, Universiti Teknologi MARA, Melaka Campus, Malaysia
Siswantini Siswantini: Faculty of Economic and Communication, Bina Nusantara University, Alam Sutera Campus, Indonesia
Arsiyanti Lestari: Faculty of Economic and Communication, Bina Nusantara University, Kemanggisan Campus, Indonesia

International Journal of Energy Economics and Policy, 2021, vol. 11, issue 2, 260-271

Abstract: This study offers new insights for policymakers to reduce income inequality, thus ensuring economic growth which greatly benefits the poor segment of population and directing financial sector to provide easy access to financial resources for lower income group at cheaper cost. Bound test was applied to examine the long-run and short-run relationships based on the sample period beginning from 1970 until 2016. The results confirmed the existence of a long-run relationship between the variables. Financial development in Malaysia, Indonesia and Thailand had successfully reduced income inequality, however, a different effect was recorded in the Philippines where income distribution was worsened. Furthermore, economic growth brought positive effect to income distribution in Malaysia and Indonesia, but not for Thailand and the Philippines. Inflation, trade openness and foreign direct investment, provided mixed results for all countries. Among the policies recommendation for this paper are there should be more easy accessibility for entrepreneurs to reach the wide range of financial services including conventional and Islamic financial products, the expansion of capital market, as well as giving proper attention to the financial sector. Besides, granting the access to capital markets for low income groups or underprivileged individuals might be helpful to them either by developing entrepreneurial skill or involvement in productive activities and receive better salaries. This policies will gives insight to the policymakers as it the outcome is based on the spread of pandemic Covid-19 that hit the world.

Keywords: Financial Development; Income Inequality; ASEAN-4; Financial Kuznets Curve (search for similar items in EconPapers)
JEL-codes: F62 G10 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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