| Summary: | This paper presents a study on the relationship between income inequality and mortality by states in Malaysia. Even though there are several persuasive evidences to support the association between income inequality and mortality, research in this field is still progressing. This study aims to develop a new mortality model that incorporates the income inequality variable and subsequently to forecast the mortality rates for Malaysia until 2024. The data used are Gini Index and mortality rates for each state of Malaysia which are extracted from the Department of Statistics Malaysia (DOSM) from 2007 to 2018. Using the Pearson correlation coefficient, this study identifies the effects and significant level of income inequality on mortality for each state in Malaysia respectively. This study extends the Lee-Carter mortality model by including the new variable of income inequality factor to estimate the mortality rates. Next, ARIMA model is used to forecast the mortality rates from 2016-2024. Results show that almost all states in Malaysia experience positive relationship between income inequality and mortality. This indicates that most states in Malaysia which have higher value of the age component relative to Gini Index would positively affect the mortality experience significantly. The extended Lee-Carter model is deemed to fit the mortality rates better as compared to the original model. The forecasted results show that children and elderly are expected to have lower mortality rates as compared to adults. This study provides better understanding on the effect of income inequality on mortality and produces a reliable mortality forecasts reflecting the income inequality factor for Malaysian population. The development of new mortality model can benefit actuaries in pricing the insurance and annuity products appropriately and strengthen the social security and public health of Malaysia effectively. © 2024 Author(s).
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