Ahmad Zafarullah Abdul Jalil

Does non-farm income improve the poverty and income inequality among agricultural household in rural Kedah?

Abstract This paper used a primary data collected through a surveys among farmers in rural Kedah to examine the effect of non farm income on poverty and income inequality. This paper employed two method, for the first objective which is to examine the impact of non farm income to poverty, we used poverty decomposition techniques- Foster, Greer and Thorbecke (FGT) as has been done by Adams (2004). For the second objective, which is to examine the impact of non farm income to income inequality, we used Gini decomposition techniques. Our result indicate that non farm income can improve the level of poverty or non farm income sources contributed towards poverty reduction among agricultural household. All of the poverty measures show that the inclusion of non-farm income into the agricultural household income reduce the level, depth and severity of poverty. But on the other hand, non farm income increased income inequality among agricultural household in Kedah. As expected agricultural income is the main source of income for rural people in the study area. The policy implication of this study is to encourage non-farm income activities among agricultural households as this would raise their income and hence, reduce poverty among them. However, it should be focused on value-added activities, especially on the lower income group.

Fiscal Decision and Fiscal Performance: the Case of Kelantan and Penang

Abstract This paper attempts to shed some lights on the relationship between the fiscal balance of state governments in Malaysia and their decision concerning their revenue and expenditure. In particular, the paper seeks to examine whether the fiscal situation of the Malaysian state governments can be explained by the way decision process regarding expenditure and revenue collection is made. For the purpose of this study, we choose to focus on two states governments namely Penang and Kelantan. The choice of these two states was made based on the significant difference in term of their fiscal situation. This study employs ARDL or bound test procedure proposed by Pesaran and Shin (1996), Pesaran and Pesaran (1997) and Pesaran et al (2001) to test for the cointegration relationships. Our results show that in the short- run, the causality seems to run from state government expenditure to state government revenue of Kelantan. This finding is consistent with the spend-and-tax hypothesis. In other words, the state government of Kelantan decides on its expenditure first before it decides on its revenue. As for Penang, the finding seems to point to an institutional separation as no causality is found between its revenue and its expenditure in the short run. In the case of long- run causality, Kelantan is found to have a negative sign of error correction model (ECM) in the revenue equation.

MACROECONOMIC INSTABILITY AND FISCAL DECENTRALIZATION: AN EMPIRICAL ANALYSIS

The main objective of this paper is to fill a critical gap in the literature by analyzing the effects of decentralization on the macroeconomic stability. A survey of the voluminous literature on decentralization suggests that the question of the links between decentralization and macroeconomic stability has been relatively scantily analyzed. Even though there is still a lot of room for analysis as far as the effects of decentralization on other aspects of the economy are concerned, we believe that it is in this area that a more thorough analyses are mostly called for. Through this paper, we will try to shed more light on the issue notably by looking at other dimension of macroeconomic stability than the ones usually employed in previous studies as well as by examining other factors that might accentuate or diminish the effects of decentralization on macroeconomic stability. Our results found that decentralization appears to lead to a decrease in inflation rate. However, we do not find any correlation between decentralization with the level of fiscal deficit. Our results also show that the impact of decentralization on inflation is conditional on the level of perceived corruption and political institutions.

Public Expenditure Expansion and Inter-ethnic and Rural-urban Income Disparity

Abstract This paper explores empirically the impact of public expenditure expansion in reducing inter-ethnic and rural-urban income disparity. The impact is examined within the context of a Social Accounting Matrix (SAM) based fixed price multiplier model. Generally the results show that public expenditure expansion has improved income inequality in Malaysia. The public expenditure expansion significantly improved the distribution of income across different household groups where it reduced both the Malay-Chinese and Malay-Indian income inequality as well as reduced income disparity between rural and urban areas. However, the improvement in income inequality is much larger in the Eight Malaysia Plan than the Ninth Malaysia Plan. This could reveal that the public expenditure expansion in the Eight Malaysia Plan gave more opportunities to the Malay to increase their income. It could also indicate that there were differences in the pattern or composition of the public sector expenditure in both plans that had influenced income distribution among the household sector which result a more significant success in the Eight Malaysia Plan. This then lead to suggest further investigation on the impacts of the various components of the public expenditure on the different household groups.

Relationship between Type of Risks and Income of the Rural Households in the Pattani Province of Thailand

This study examines the relationship between type of risks and income of the rural households in Pattani province, Thailand using the standard multiple regression analysis. A multi-stage sampling technique is employed to select 600 households of 12 districts in the rural Pattani province and a structured questionnaire is used for data collection. Evidences from descriptive analysis show that the type of risks faced by households in rural Pattani province are job loss, reduction of salary, household member died, household members who work have accident, marital problem and infection of crops/livestock. In addition, result from the regression analysis suggests that job loss, household member died and marital problem have significant negative effects on the households’ income. The result suggests that job loss has adverse impact on households’ income. The implication of this is that the living standard of household will continue to deteriorate as large proportion of them could either not find job or lost their jobs. Therefore, an important policy suggestion is that government should formulate a policy that considers the creation of employment especially for the poor households with low-income particularly in the rural area. Also, government should provide an appropriate social security benefits program on which the affected population can rely on in case of problem such as sickness/accident/death of the household members. Concerning the marital problem in the households, an important implication to the policy maker is to formulate a policy or design strategy development principles of holistic family.

The Political Structures and Subnational Government's Fiscal Behavior in Malaysia

Abstract This paper examines the relationship between the political characteristics of the Malaysian government and the state governments fiscal behavior. In particular, we seek to analyze whether the incentives for the state governments to observe a prudent spending behavior have not been undermined by the fact that they have been able to influence relevant central government decisions regarding their finance. Our estimations results show that states that are overrepresented at the executive level tend to have higher spending and deficits. However, we don’t find any correlation between overrepresentation at the Parliament and states governments’ fiscal outcomes. This can be explained by the fact that in Malaysia as is frequently the case in developing nations, the legislature is peripheral to the executive in terms of decision making power. The results also show that ideological belonging does not have any impact on the state governments’ level of expenditures and deficits. We do not find any significant correlation between the level of support obtained by the ruling party in state elections and the level of the state governments’ expenditures and deficits.