Regional heterogeneity in growth and inequality elasticities of poverty in transition countries

Abstract

Using data for 25 transition countries, this article provides estimates of the growth and inequality elasticities of poverty for three regions: Central Europe (CE), South-East Europe and the former Soviet Union (FSU). Regional differences in the elasticities are decomposed into the contributions of (i) differences in initial conditions (expenditure density at the poverty line and inequality) and (ii) differences in sensitivity of the elasticities to these initial conditions. The elasticities are highest for CE and lowest for the FSU. Using a common poverty line, regional elasticity differences are explained predominantly by differences in the mean consumption expenditures per capita.

Keywords:

• growth elasticity
• inequality elasticity
• poverty
• transition

JEL Classification:

• I32

Notes

¹ For explanation purposes, here we refer to income as the individual welfare measure, while in the empirical exercise, due to data availability, we use consumption expenditures instead.

² One-hundred and twenty three 1-year periods, 23 two-year periods, 10 three-year periods, 7 four-year periods, 2 five-year periods, 2 six-year periods and one seven-year period. For periods longer than 1 year, all changes are annualized.

³ CE: Estonia, Hungary, Latvia, Lithuania, Poland, Slovak Republic, Slovenia; FSU (without Estonia, Latvia and Lithuania): Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyz Republic, Moldavia, Russia, Ukraine, Tajikistan; SEE: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia FYR, Montenegro, Romania, Serbia.