Long Run Relationship Between Financial Development, ICT and English Proficiency on Income Inequality Evidence from Malaysia

10.2478/bjlp-2022-002141

Abstract

Income inequality is a persistent phenomenon and fundamental issues of concern especially in this new digital era because unequal access to finance has long been recognized as a critical mechanism for generating persistent income inequality. Mixed explanatory findings on past studies suggest that although financial development promotes economic growth, this does not necessarily benefit those on low-income in emerging countries. In addition, development of ICT is entwined with the role of English as a significant language which have played a part in the process of globalization and knowledge explosion. Nowadays ICT tools and approaches are being used widely due to their convenience, omnipresence, effectiveness and economy. Use of English language has become vital for better learning and earning. This study examines the role of financial development, ICT and English proficiency in influencing income inequality in Malaysia over the period of 1979-2016. The empirical results based on ARDL bounds test indicated that financial development and English proficiency were seen to support the hypothesis that both factors can reduce the income gap in the long run. While ICT has shown different results, its improvement has only reduced the income gap for the short term. Hence the need for strengthening ICT policy is crucial as it can lead to development. Mastery of English is also seen as fostering economic resilience.