Determinants of Poverty in Malaysia

Chen, Sze Er (2024) Determinants of Poverty in Malaysia. Final Year Project (Bachelor), Tunku Abdul Rahman University of Management and Technology.

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Abstract

Poverty is a complicated issue and a key to sustainable development in a country and worldwide. This is because poverty is closely associated with economic activities, country development, and human capital development. Poverty can be a matter to the country. In addition, Covid-19 also created a new poor dilemma, pushing 580,000 M40 households into B40. Hence, identifying the determinants of poverty is crucial since minor changes in the exogenous variable likely cause several million households to experience poverty. This research aimed to examine whether poverty is affected by real gross domestic product per capita (RGDPC), unemployment rate (UN), education attainment (EDU), and life expectancy (HEALTH) across the years from 1980 to 2020 in Malaysia. The Autoregressive Distributed Lag (ARDL) is employed in this study to verify the short-run and long-run relationship between the POVERTY and its determinant. The study found that real gross domestic product per capita (RGDPC), unemployment rate (UN), education attainment (EDU), and life expectancy (HEALTH) significantly impact Malaysian poverty in the short run. However, POVERTY will respond to the changes in RGDPC and EDU immediately, while UN and HEALTH will have a delayed impact on the POVERTY. In addition, there is also a unilateral short-run ganger cause of EDU to the POVERTY changes at a 10% significance level and HEALTH changes at a 5% significance level. Besides, RGDPC, UN, and POVERTY have a long-run positive relationship, while EDU and HEALTH are insignificant to alleviating poverty in the long run. The possible reasons and proposed policy have been discussed. The policy mainly focuses on poverty alleviation through improving income distribution, the quality of the education system, the accessibility of health care services, and eliminating unemployment within Malaysia.