Assessing the impact of human capital development on income inequality in the ASEAN region: an empirical analysis

This study examines the role of human capital development in influencing income inequality across five ASEAN countries-Indonesia, Malaysia, the Philippines, Singapore, and Thailand-over the period from 1970 to 2019. Using an autoregressive distributed lag (ARDL) model, we explore both short- and long-term relationships between income inequality and key economic factors, including trade openness, GDP per capita, inflation, and employment. Our findings reveal that, in the long term, human capital development significantly reduces income inequality in Indonesia, Malaysia, the Philippines, and Thailand, underscoring the importance of education and skills in promoting equitable wage distribution. In Singapore, however, the effect of human capital on inequality is minimal, reflecting a mature labour market. Trade openness and GDP per capita are positively associated with income inequality in several ASEAN economies, suggesting that economic gains often benefit higher-income groups. Employment shows varied effects, reducing inequality in Singapore but increasing it in the Philippines and Thailand, where informal employment is prevalent. Targeted inflation control and progressive fiscal policies emerge as effective strategies to protect low-income households, while integrating SMEs into trade networks and expanding reskilling initiatives can ensure broader economic participation. These findings highlight the need for a policy framework combining quality-driven human capital investment, equitable trade practices, and progressive taxation. Through coordinated regional efforts, ASEAN countries can work towards reducing income disparities and fostering a more inclusive economic environment.