Impacts of allocation of government spending on economy growth and income inequality in Malaysia

Liu, Zi Ching (2024) Impacts of allocation of government spending on economy growth and income inequality in Malaysia. Final Year Project, UTAR.

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Abstract

This research investigates the impacts of allocation of government spending on economic growth and income inequality in Malaysia, with a particular focus on understanding the determinants and consequences of expenditure in key sectors. The dataset period is from the year 1980 to the year 2021. The findings reveal several notable insights. Firstly, government spending on agricultural and rural development, as well as education and training, emerges as significant determinants of economic growth in the long run. Conversely, expenditure on health and pension funds is found to be insignificant in influencing economic growth. In terms of income inequality, government spending on agricultural and rural development is identified as the sole significant determinant in the long run, while other variables exhibit insignificance. Meanwhile, in the short run, government spending on pension fund is the only significant determinant towards income inequality in Malaysia. Finally, government is recommended to focus expenditure on education and training, should review pension policies by continuously monitor and adjust the pension system, and improve transparency and accountability in government spending. Keywords: allocation of government spending, economy growth, income inequality

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