Income inequality and ethnic differences in income are important political issues in Malaysia. This paper uses 1976-1977 data on over 1,000 households in Peninsular Malaysia to show that estimates of the extent of income inequality and of the relative incidence of poverty are sensitive to several dimensions of income measurement. For example, when the definition of income is broadened to include nonmarket sources of well-being, inequality falls and the relative position of rural Malays improves. However, standardizing to remove variations in hours of work increases estimates of the proportion of rural Malays who are poor.
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