Yusof, Yusniliyana
Description
Malaysia is one of the countries in the world that has adopted a
unique system of governance that involves monarchy, democracy and
federal system. Nevertheless, all the thirteen states are
governed by employing a federal governance structure headed by
the Prime Minister. Given the federal structure of Malaysian
economy, it is logical to expect the variations in the
socio-economic development across the states. It is interesting
and also important to understand...[Show more] the force behind the variations
across the performance of the states. This thesis first
identifies the significant factors that influence the variation
in economic growth across the states, which is the core factor
determining socio-economic development. Next, the thesis
highlights the influence of the federal system on the development
expenditure of the states, which is crucial for socio-economic
development. Finally, the thesis examines the impact of
decentralisation on transferring the Malaysian economy from the
middle-income country to high-income country. The following
paragraphs briefly explain how the above three main analyses have
been carried out in this thesis.
In Chapter 2, the study contributes to the aim of regional
development policy in reducing regional disparities, by examining
the spatial balance in socio-economic development across the
states of Malaysia based on few selected socio-economic
indicators. Besides, the study has attempted to understand the
issues in the development gaps across the Malaysian states by
evaluating the factors that explained the variation in economic
growth. Though the pattern in the spatial socio-economic
imbalance demonstrates a decreasing trend, the development index
reveals that performance of less developed states remained behind
that of the developed states for more than a decade. Based on
three-stage least squares (3SLS) estimation technique, all
independent variables in the main equation are significant to
explain the development gaps within the states that covers the
period between 2005 and 2015. The significant factors in
explaining the variation in growth across the Malaysian states
are relating to agriculture, manufacturing, human capital,
population growth, Chinese ethnic, institutional factors and
natural resources.
In Chapter 3, the study examines whether there is convergence in
development expenditure across Malaysian states and investigates
the importance of decentralisation in affecting the pattern of
development expenditure during the short run and long run. The
convergence analysis involved the data of annual growth for the
short run, and average three-year and five-year growth for the
long run from 2000 to 2015. The study uses panel data approaches
of pooled OLS, fixed effects and random effects estimation
procedures. The findings provide empirical evidence on the
development expenditure convergence within the states during both
short run and long run. It is also found that all fiscal
decentralisation indicators (state per capita revenue,
state-sourced per capita revenue, state-sourced revenue as a
share of total revenue and state-sourced capacity as a share of
the national average) are imperative in influencing the fiscal
behaviour of state governments in Malaysia. The assistance from
the federal government through transfer payment is needed to
strengthen the expenditure capacity of Malaysian states.
In Chapter 4, the study inspects the role of fiscal
decentralisation as a solution for escaping from the
middle-income trap. The study employed annual time series data
from 1985 to 2015. The Autoregressive Distributed Lag (ARDL)
bounds test reveals the presence of long run relationship between
the levels of the dependent variable (economic growth) and the
regressors (the participation of federal, state and local
governments in the economy, labour force and net exports). The
results of the study offer a possible solution that could help
Malaysia to escape from the stagnant economic growth. It is found
that fiscal decentralisation has a growth effect on Malaysian
economy though the benefits of decentralisation are realised
differently at different levels of government. The positive
impact of revenue decentralisation is realised at the state but
not the local level. In contrast, the opposite results are
reported in the case of expenditure decentralisation. The
benefits of expenditure decentralisation are accomplished at
local but not the state level.
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