Empirical Analysis of Poverty Determinants in Republic of Macedonia

Abstract

Poverty is one of the most serious and persistent problems facing the world. Hence, poverty reduction is a top priority of international policy and agenda of many international and financial organizations such as World Bank and especially United Nation. For illustration, poverty reduction is top priority of the United Nations Millennium Development. The situation with poverty is not significantly different in Republic of Macedonia, so the poverty reduction is one of the top priorities of Macedonian government many years ago. As a result of government active role through many programs, measures and actions the poverty rate in Republic of Macedonia has been reduced from 30% in 2006 to 21.5% in 2015. The paper empirically investigate the poverty in Republic of Macedonia and tries to answer what are the main determinants of high rate of poverty in the country by applying VAR (Vector Auto Regression) econometric model where we investigate how the economic growth, unemployment rate and school enrollment in high school influence of poverty rate. The estimated results show that economic activities and school enrollment in secondary education decrease the poverty rate, while there is negative correlation between poverty rate and unemployment rate. Additionally, the empirical analysis of poverty rate shows that the most vulnerable persons, groups and households are the youngest persons, households of two adults with two, three or more dependent children, unemployed and other inactive persons and households without social transfers. Finally, the paper summarizes the government policies, actions, and measures for poverty reduction.