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This paper explores empirically the impact of public expenditure expansion in reducing inter-ethnic and ruralurban income disparity. The impact is examined within the context of a Social Accounting Matrix (SAM) based fixed price multiplier model. Generally the results show that public expenditure expansion has improved income inequality in Malaysia. The public expenditure expansion significantly improved the distribution of income across different household groups where it reduced both thedoi:10.1016/s2212-5671(12)00034-2 fatcat:gqqdcgkklnbxri26kvwmklzfje