Fuel subsidy rationalisation: the perils of the middle class in Malaysia

The middle-class is reportedto experience the "middle-class squeeze", where they arefacing a decliningrelative income and simultaneously rising costs of living particularly with regards to housing, educqtion and health care. Besides, the middle-class is also reported to face "the mi...

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Main Authors:	Roslan Abdul-Hakim, Russayani Ismail, Nor Azam Abdul-Razak
Format:	Article
Language:	English
Published:	Penerbit Universiti Kebangsaan Malaysia 2014
Online Access:	http://journalarticle.ukm.my/8515/ http://journalarticle.ukm.my/8515/ http://journalarticle.ukm.my/8515/1/jeko_48%282%29-8.pdf

id	ukm-8515
recordtype	eprints
spelling	ukm-85152016-12-14T06:47:25Z http://journalarticle.ukm.my/8515/ Fuel subsidy rationalisation: the perils of the middle class in Malaysia Roslan Abdul-Hakim, Russayani Ismail, Nor Azam Abdul-Razak, The middle-class is reportedto experience the "middle-class squeeze", where they arefacing a decliningrelative income and simultaneously rising costs of living particularly with regards to housing, educqtion and health care. Besides, the middle-class is also reported to face "the middle-class trap", where on the one hand, they are regarded ai "too rich" to qualifi for any government support, but on the other hand, they found themselves in realily "not too rich" to sustain their lives withoutfacing hardships. These observations unfortunately seem to be equally true in Malaysia, which raises the need to scrutinise the likely impact of government policy on the middle-class. Iilith the recent fuel subsidy rationqlisation in Malaysia, this paper attempts to analyse the likely welfore impact of this policy towards the middle-class in the Malaysian society. Examining this issue is crucial and desirable since the problems faced by the middle-class tend to be overlooked by the policy makers. In our analysis, we use various definitions of "middle-class" as suggested in the literature, and examine the direct, indirect qnd the total welfare effects of fuel subsidy removal on them using data from the Household Expenditure Survey (HES) 2004/2005 as well as the Input-Output Table for 2004/2005. Ourfindings reveal that, in line with the common perception, the benefts offuel subsidy accrued mostly to the rich. Ironically, the costs of subsidy removal are borne mostly by the middle-class in terms of the direct effect. Yet in terms of the indirect welfare effect, the costs of subsidy removal are borne equally by the middle-class as well as the lower and the upper class. Since the indirect welfure effect outweighs the direct welfare effect, we conclude that while the rich get most of the benefitsfromfuel subsidy, its removal hurts the middle-class the most. Ourfnding implies that fuel subsidy rationalisation must befollowed by a practical strateglt and program to lessen the negative impact offuel subsidy removal not only for the poori but also for the middle-clqss as well. Penerbit Universiti Kebangsaan Malaysia 2014 Article PeerReviewed application/pdf en http://journalarticle.ukm.my/8515/1/jeko_48%282%29-8.pdf Roslan Abdul-Hakim, and Russayani Ismail, and Nor Azam Abdul-Razak, (2014) Fuel subsidy rationalisation: the perils of the middle class in Malaysia. Jurnal Ekonomi Malaysia, 48 (2). pp. 83-97. ISSN 0127-1962 http://www.ukm.my/fep/jem/content/2014-2.html
repository_type	Digital Repository
institution_category	Local University
institution	Universiti Kebangasaan Malaysia
building	UKM Institutional Repository
collection	Online Access
language	English
description	The middle-class is reportedto experience the "middle-class squeeze", where they arefacing a decliningrelative income and simultaneously rising costs of living particularly with regards to housing, educqtion and health care. Besides, the middle-class is also reported to face "the middle-class trap", where on the one hand, they are regarded ai "too rich" to qualifi for any government support, but on the other hand, they found themselves in realily "not too rich" to sustain their lives withoutfacing hardships. These observations unfortunately seem to be equally true in Malaysia, which raises the need to scrutinise the likely impact of government policy on the middle-class. Iilith the recent fuel subsidy rationqlisation in Malaysia, this paper attempts to analyse the likely welfore impact of this policy towards the middle-class in the Malaysian society. Examining this issue is crucial and desirable since the problems faced by the middle-class tend to be overlooked by the policy makers. In our analysis, we use various definitions of "middle-class" as suggested in the literature, and examine the direct, indirect qnd the total welfare effects of fuel subsidy removal on them using data from the Household Expenditure Survey (HES) 2004/2005 as well as the Input-Output Table for 2004/2005. Ourfindings reveal that, in line with the common perception, the benefts offuel subsidy accrued mostly to the rich. Ironically, the costs of subsidy removal are borne mostly by the middle-class in terms of the direct effect. Yet in terms of the indirect welfare effect, the costs of subsidy removal are borne equally by the middle-class as well as the lower and the upper class. Since the indirect welfure effect outweighs the direct welfare effect, we conclude that while the rich get most of the benefitsfromfuel subsidy, its removal hurts the middle-class the most. Ourfnding implies that fuel subsidy rationalisation must befollowed by a practical strateglt and program to lessen the negative impact offuel subsidy removal not only for the poori but also for the middle-clqss as well.
format	Article
author	Roslan Abdul-Hakim, Russayani Ismail, Nor Azam Abdul-Razak,
spellingShingle	Roslan Abdul-Hakim, Russayani Ismail, Nor Azam Abdul-Razak, Fuel subsidy rationalisation: the perils of the middle class in Malaysia
author_facet	Roslan Abdul-Hakim, Russayani Ismail, Nor Azam Abdul-Razak,
author_sort	Roslan Abdul-Hakim,
title	Fuel subsidy rationalisation: the perils of the middle class in Malaysia
title_short	Fuel subsidy rationalisation: the perils of the middle class in Malaysia
title_full	Fuel subsidy rationalisation: the perils of the middle class in Malaysia
title_fullStr	Fuel subsidy rationalisation: the perils of the middle class in Malaysia
title_full_unstemmed	Fuel subsidy rationalisation: the perils of the middle class in Malaysia
title_sort	fuel subsidy rationalisation: the perils of the middle class in malaysia
publisher	Penerbit Universiti Kebangsaan Malaysia
publishDate	2014
url	http://journalarticle.ukm.my/8515/ http://journalarticle.ukm.my/8515/ http://journalarticle.ukm.my/8515/1/jeko_48%282%29-8.pdf
first_indexed	2023-09-18T19:52:29Z
last_indexed	2023-09-18T19:52:29Z
_version_	1777406312218361856

Fuel subsidy rationalisation: the perils of the middle class in Malaysia

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