Natural resource wealth, unemployment, income inequality and absolute poverty across selected Malaysian states: evidence from panel data

This study examines the relationships between natural resource wealth, unemployment, income inequality, and absolute poverty in Sabah, Sarawak, Terengganu, and Selangor from 2001 to 2021. Using secondary data obtained from the Department of Statistics Malaysia (DOSM), the study employs correlation analysis and panel data regression, with the Chow, F-statistic, and Hausman tests used to determine the appropriate model specification. The Fixed Effects Model was identified as the most appropriate estimator. The empirical findings indicate a statistically significant positive relationship between unemployment and absolute poverty, suggesting that higher unemployment is associated with higher absolute poverty rates. In contrast, no statistically significant relationships were found between natural resource wealth and absolute poverty or between income inequality and absolute poverty across the selected states. The non-significant relationship between natural resource wealth and absolute poverty may be interpreted in light of the Resource Curse Theory, suggesting that resource abundance alone does not necessarily translate into poverty reduction without effective and inclusive resource governance. The findings highlight the importance of employment generation, economic diversification, skills development, and inclusive distribution of resource-related benefits in promoting sustainable poverty reduction at the subnational level in Malaysia. The study provides policy implications for strengthening employment opportunities and ensuring that natural resource wealth contributes more effectively to inclusive economic development.