Shofiatul Hilwa, Risna Triandhari, Raden Parianom

Human Development and Income Inequality in D-8 Countries: A Maqashid Sharia Perspective

Introduction

Human development and income inequality in d-8 countries: a maqashid sharia perspective. Analyze how Maqashid Sharia-based human development affects income inequality in D-8 countries (2003–2022). Panel ARDL reveals long-run reduction, advocating for value-based policies.

Abstract

Research Originality: This study is original in applying a Maqashid Sharia-based human development index to examine the short- and long-run effects of human development on income inequality in D-8 countries. Research Objectives: This study aims to analyze whether human development based on the Maqashid Sharia framework can effectively reduce income inequality in D-8 countries in both the short run and the long run. Research Methods: Using panel data from eight D-8 countries during 2003–2022, income inequality is measured by the Gini index and the Palma ratio, while human development is represented by the Maqashid Sharia Index (MSI). The analysis employs a Panel ARDL model with the Pooled Mean Group estimator to capture short-run and long-run relationships. Empirical Results: The results show that Maqashid Sharia-based human development significantly reduces income inequality in the long run across D-8 countries, reflecting the maslahah-oriented approach of Islamic economic development. In the short run, it reduces inequality in Indonesia and Turkey but increases inequality in Bangladesh, Egypt, and Nigeria. Implications: These findings suggest that human development policies should incorporate moral and value-based dimensions. Policymakers in D-8 countries need to promote not only education, health, and income, but also ethical values to ensure more equitable income distribution. JEL Classification: C33, F22, I32, J61, J62

Review

This study presents a timely and original contribution to the discourse on development economics, particularly within an Islamic framework. Its novelty lies in the application of a Maqashid Sharia-based human development index to investigate its impact on income inequality in D-8 countries. By explicitly integrating ethical and value-based dimensions into the concept of human development, the research offers a fresh perspective that challenges conventional approaches, which often overlook these crucial elements. The overarching objective, to ascertain the effectiveness of this Sharia-compliant human development framework in mitigating income inequality over both short and long horizons, is highly relevant for policymakers striving for equitable growth in Muslim-majority nations. The methodology employed is robust, utilizing panel data from eight D-8 countries spanning two decades (2003–2022). The choice of measuring income inequality through both the Gini index and the Palma ratio provides a comprehensive view of distribution, while the use of the Maqashid Sharia Index (MSI) as the core human development metric is central to the study's innovative approach. The analytical rigor is further enhanced by the application of a Panel ARDL model with the Pooled Mean Group estimator, a suitable technique for capturing both short-run dynamics and long-run equilibrium relationships in heterogeneous panels. The empirical results offer compelling evidence, indicating that Maqashid Sharia-based human development significantly reduces income inequality in the long run across the D-8 bloc, aligning with the maslahah-oriented principles of Islamic economic development. However, the short-run findings present a more nuanced picture, showing positive impacts in Indonesia and Turkey but an unexpected increase in inequality in Bangladesh, Egypt, and Nigeria. These findings carry significant implications for policy formulation, particularly for D-8 countries seeking sustainable and equitable development. The study strongly advocates for a shift in human development policies to incorporate moral and value-based dimensions, beyond the traditional focus on education, health, and income. Policymakers are urged to promote ethical values alongside standard development indicators to ensure a more just and equitable income distribution. The mixed short-run results suggest that while the long-term vision of Maqashid Sharia-based development is promising for reducing inequality, the transition and implementation phases may require careful consideration of country-specific contexts to mitigate potential short-term adverse effects, underscoring the complexity of integrating normative frameworks into practical economic policy.

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