Ethnic inequality and poverty in Malaysia since May 1969. Part 1: Inequality

The race riots that broke out in Kuala Lumpur in May 1969 triggered a national public effort to greatly reduce both Malaysia's longstanding ethnic inequalities and its high incidence of poverty. This paper studies how various measures of ethnic inequality evolved since 1969. Two conceptual distinctions are emphasized: that between income inequality and polarization (on the one hand) and that between relative and absolute inequality (on the other). Over the last 50 years, the poorest ethnic group, the Bumiputera, have had the highest growth rate of household incomes, which helped assure a (substantial) long-term decline in relative between-group inequality, which (in turn) substantially reduced overall income inequality. Measures of ethnic polarization moved highly synchronously with between-group inequality. The differential growth rates by ethnicity were not enough to prevent rising absolute inequality, given the extent of the initial ethnic disparities. Despite the progress against relative inequality, Malaysia's absolute disparities by ethnicity are now even larger than 50 years ago. The second paper of this two-part paper examines the contribution of lower relative ethnic inequality to the country's progress against poverty.