Summary
The purpose of the present paper is to investigate the impact of the size of the shadow economy on income inequality in Malaysia for the period 1980 to 2018. The size of the shadow economy in Malaysia is estimated around 28% of GDP in 2018 (Habibullah et al., 2022). The tax revenue losses by the Malaysian government are quite sizeable, and this will make the government incapable to provide quality infrastructure and social services to the people. In this study, we intend to determine whether shadow economy increase or decrease or even has a nonlinear effect on income inequality in Malaysia.
