Impact of Institutional Developments, Financial and Trade Openness on the Income Equality and Social Welfare in Southeast Asian Countries

During the 1990s, overall economic performance of South East Asian countries was remarkable in many respects, including a significant increase in economic development. This paper empirically assesses the reasons behind such progress by focusing on the impact of foreign direct investment, trade openness, financial liberalization and institutional developments on the income equality and social welfare. The emphasis is on the households' income shares (or income inequality) which, we find out, has been affected by foreign direct investment and trade openness over the period of 1991-2004. We find that stock market liberalization and institutional developments have increased the income share of only the high income group. We also find that trade openness and population demographics were significant welfare enhancing determinants of social expenditure, whereas, financial liberalization and foreign official loans were significant welfare reducing factors