Abstract
During the last few decades, economists have tried to find a solution to eradicate poverty, especially since the United Nations’ Sustainable Development Goals were launched. The target of Goal 1 is to end poverty in all its forms everywhere. While income inequality and unemployment have played a major part in contributing to poor wellbeing in the world, other factors such as political instability, a lack of good investment opportunities, and living conditions have contributed to it as well. Thus, in this work, the authors analyze the factors that impact poverty and compare these results between countries within the European Union and post-communist countries that include the Western Balkan (WB) countries: Albania, Bosnia and Herzegovina, Montenegro, North Macedonia, and Serbia. The method used consists of both descriptive statistics and multiple regression analysis using the fixed effect model where poverty is taken as the dependent variable. The data used in this study are gathered from the World Bank and Legatum Prosperity, during the period between 2009 and 2018. The results show that income inequality does indeed impact the further progress of poverty for both the EU and WB, while economic development in terms of GDP is shown to have a more significant impact on EU than in WB, where the most significant impact was through income per capita. Other factors such as education, investment environment, and especially unemployment also significantly impacted on decreasing the poverty rate in both economic zones.
Highlights
“Most of the people in the world are poor, so if we knew the economics of being poor, we would know much of the economics that really matters. (Schultz, 1980)”
Our work analyzes the impact of income inequality and economic growth on the poverty level of European Union and Western Balkans
Since there are not many studies done on poverty as a comparison between EU and WB, from the analysis and results conducted, the key findings are that income inequality is higher in the Western Balkans than it is in the European Union, but especially GDP per capita was the variable that showed a huge gap between the two zones
Summary
“Most of the people in the world are poor, so if we knew the economics of being poor, we would know much of the economics that really matters. (Schultz, 1980)”. Because of the frequent overlapping of the abovementioned issues, the process of poverty reduction becomes a challenge in itself Given this complexity, and the existence of different trade-offs, the authors support the idea that a country ensuring sustainable development can construct the right balances and get the best policy outputs regarding poverty reduction and other conditions. Regarding the problem with slow economic development, high inequality presented and eventually high poverty rates, Wilkinson, and Pickett [24] observed, in 2010, that this uneven income distribution has had a direct impact on people’s lives. This inequality has led to poor governance in societies, the living conditions are worsened, and homicide rates are increased. Health, education and the quality of life seem to worsen in these unequal societies
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