Four-Way Linkages of Trade Openness, Income Inequality, Environmental Degradation and Economic Growth in Malaysia

DOI

10.2991/aebmr.k.211225.036How to use a DOI?

Keywords

gross domestic product (GDP); trade openness; income inequality; environmental degradation

Abstract

The linkages between trade openness, income inequality, environmental degradation, and economic development has sparked much discussion in the economics literature. Despite the fact that studies on these variables have been done, no studies have been conducted explicitly analysing the linkages of these four variables. Hence, this study aims to investigate the four-way linkages of trade openness, income inequality, environmental degradation and economic growth in Malaysia. The variables utilised in this study are trade openness, income inequality, environmental degradation and economic growth for a period of 30 years (1990-2019). The data used in this study was obtained from World bank, the Global Economy and Department of Statistics, Malaysia. The general objective of this study is to investigate the relationship between trade openness and economic growth in Malaysia. The methodologies employed in this study are Unit Root test which compromises of Augmented Dickey-Fuller and Phillips-Perron Test to test for stationarity, while Johansen and Jeselius test is used to test whether the variables are cointegrated, Vector Error Correction Model test to analyse the long run relationship of the variables by the values of Error Correction Term(ECT), Granger Causality test to analyse the short run causalities between these four variable, and diagnostic tests which consists of Normality test, Serial Correlation LM test, Heteroskedasticity test, Ramsey RESET test, CUSUM and CUSUM of Squares test. The results of this study show that long run and short run causalities exists between these variables. It shows that trade openness and environmental degradation have positive impacts whereas income inequality has negative impacts on the economic growth in Malaysia. The creation of energy-saving strategies is anticipated to contribute to reduced CO2 emissions which would reduce the income inequality while maintaining the GDP growth and trade openness, and the study findings offer Malaysian and other decision- makers important policy insights in a number of ways. So, in order to achieve sustainable development, Malaysia’s policymakers will need to implement a balanced plan that stimulates growth, closing the gap of incomes and international trade.

Copyright

© 2022 The Authors. Published by Atlantis Press International B.V.

Open Access

This is an open access article under the CC BY-NC license.

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TY  - CONF
AU  - Navanita Rajasegar
AU  - Rossazana Ab-Rahim
PY  - 2022
DA  - 2022/01/13
TI  - Four-Way Linkages of Trade Openness, Income Inequality, Environmental Degradation and Economic Growth in Malaysia
BT  - Proceedings of the International Conference on Sustainable Innovation Track Accounting and Management Sciences (ICOSIAMS 2021)
PB  - Atlantis Press
SP  - 258
EP  - 268
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.211225.036
DO  - 10.2991/aebmr.k.211225.036
ID  - Rajasegar2022
ER  -