Measuring the inequality of Malaysian top incomes using a new Pareto-type distribution in rural and urban regions

• Main Authors: Raof, Anis Syazwani Abd, Haron, Mohd Azmi, Mohd Safari, Muhammad Aslam, Siri, Zailan
• Format: Conference or Workshop Item
• Published: American Institute of Physics Inc. 2024
• Subjects: QA Mathematics
• Online Access: http://eprints.um.edu.my/44898/; https://doi.org/10.1063/5.0171951

Income inequality had been one of the most important indicators of a country's economic success. In order to achieve the objective of becoming a high-income nation, the income inequality had to be addressed by reducing the rural-urban gap as an effort to eradicate the poverty. This study analyzes the income inequality among Malaysian top earners in rural and urban regions using household income data from 2009-2019 based on the new Pareto-type distribution. The shape parameter of the model is estimated using the maximum likelihood estimator method and its scale parameter is determined using the fixed proportion technique. Then, the income inequality measures such as the Lorenz curve, Gini index, and Theil index are derived from the new Pareto model to examine the level of disparity over the years. The analysis shows that the new Pareto model explains well for the data in the top 20-30 and top 30-35 of rural and urban household incomes respectively. Besides, the difference in income inequality's trends between the rural and urban region requires a new economic strategy with a more specific target in mind to reduce the inequality in both regions. © 2024 Author(s).