This paper estimates the ethnic economic gap in Malaysia before the New Economic Policy (NEP) in 1970 and after the
end of the NEP in 1986. Specifically, this paper uses the Duncan Dissimilarity Index to estimate occupation segregation
between ethnic Malays and the ethnic Chinese; ethnic Malays and ethnic Indians; and the ethnic Chinese and ethnic
Indians before and after the policy. Next, the paper estimates the wage gap between the three ethnicities by using A
Generalized Oaxaca Decomposition, both before and after the NEP. The data of this study is obtained from two principal
sources. Data concerning wage and salary figures is obtained fromthe1966-67 West Malaysian Family Survey; 1976-
77 First Malaysian Family Life Survey; and the 1988 Second Malaysian Family Life Survey. The other sources of
data variables are obtained from the 1970 Population Census of Peninsular Malaysia; the 1980 Population Census
of Peninsular Malaysia; and the 1991 Population and Housing Census of Malaysia. The study finds that occupation
segregation was reduced between all ethnicities by the end of the NEP. However, the wage gap between the ethnic
Chinese and ethnic Malays; and the ethnic Chinese and ethnic Indians continued to rise after 1986.Additionally, while
the wage gap decreased between ethnic Malays and ethnic Indians in some specific occupations, the wage gap increased
between ethnic Malays and the ethnic Chinese in all specific occupations during the same period.