Impact of Economic and Non-Economic Factors on Income Inequality in ASEAN Countries

Abstract

This study examined the impact of economic and non-economic factors on income inequality in several ASEAN countries: Indonesia, Malaysia, Thailand, Vietnam, and the Philippines. The macroeconomic determinants of income inequality in certain countries were empirically modeled and panel data analysis undertaken for the 2012–2016 period. In light of previous studies, non-economic variables, such as the democratic and corruption perceptions indices, that can increase income inequality were examined. The results revealed that income inequality in ASEAN countries was influenced by the contribution of the agricultural sector to GDP, number of automatic teller machines per 100,000 adults, depth of credit information index, dependency ratio, corruption perceptions index, democracy index, and unemployment rate. Based on these results, it is recommended that governments of ASEAN countries reduce income inequality by encouraging: investment to create a formal labor market and subsequent informal employment; and the provision of more bank services in rural areas and design innovative products for the lower middle class, improving access to banks for not only savings but also credit.