During recent years, among many approaches to analyzing and combating poverty, the approach known as pro-poor growth, has gained popularity. This approach assumes that high economic growth may not be a sufficient condition for poverty reduction. Whether economic growth is favourable to the poor is determined by the participation of various groups in the generation and distribution of national income.
Over a dozen years, the impact of economic growth on poverty reduction has been analysed and discussed in numerous theoretical and empirical papers (Araar et al., 2009; Bibi et al., 2012; Dollar & Kraay, 2002; Duclos, 2009; Essama-Nssah & Lambert, 2009; Grimm, 2007 Kakwani, et al., 2004; Kakwani & Pernia, 2000; Lo Bue & Palmisano, 2019; Ravallion, 1994; Ravallion & Chen, 2003; Son, 2004; Son & Kakwani, 2008; Tebaldi & Kim, 2015; Zeman & Shamsuddin, 2017; Panek & Zwierzchowski 2021). If economic growth leads to poverty reduction, then macroeconomic policy should focus on actions supporting growth while also possibly limiting funds for programs aimed at direct poor support. However, if economic growth does not reduce poverty, state policy should put more emphasis on direct financial support for the poor. The research conducted thus far does not give an unambiguous answer to the question of whether economic growth favours the poor. Results largely depend on the definition of pro-poor economic growth, the scope of the study, and the statistical methods used. Moreover, it is believed that the level of economic development and general welfare and pension regimes all play roles in this process (Ashley, 2007; Dollar & Kraay, 2002; Harmáček, et al., 2017; Lo Blue & Palmisano, 2019; Kośny & Yalonetzky, 2015; Lopez 2006; Ruiz-Castillo, 2009 Son & Kakwani, 2008;).
The aim of this article is to evaluate whether economic growth was pro-poor in the Balkan countries between 2012 and 2017. Moreover, we investigate how different definitions of pro-poor growth affect conclusions drawn from an empirical analysis and to what extent results obtained for various measures remain comparable.
We included Bulgaria, Croatia, Greece, Romania, Slovenia, and Serbia in the empirical analysis. All six countries analysed experienced an overall increase in GDP in the 2012–2017 period. A temporary decrease in GDP per capita took place only in Greece, Croatia and Slovenia in 2013 due to the financial crisis. The mean personal income also increased in almost all countries in the analysed time frame (except for Bulgaria and Greece in 2014 and 2015). The question arises: how the GDP growth and general increase in mean personal incomes translate into the financial situation of impoverished individuals?
The paper attempts to answer whether the positive (negative) economic growth in these countries stimulates a decrease (increase) in poverty and whether it was favourable to the poor according to the various definitions of ‘being favourable’ introduced in the literature (more on this in Section 2.1.).
In the theoretical part of the study, various approaches to the analysis of the growth patterns and basic measures of pro-poor growth are presented. Next, theoretical foundations for the construction of these measures are defined, and their basic advantages and limitations are discussed. We propose certain modifications of these measures. In the empirical part of the study, we try to verify whether the economic growth in the Balkan countries between 2012 and 2017 was favourable to the poor. The empirical analysis is based on the latest available panel data taken from the European Union Survey on Income and Living Conditions (EU-SILC) and Eurostat data on GDP growth and inflation.
The outline of the paper is as follows. Section 2 is devoted to the conceptual framework. Section 3 presents various approaches to the analysis of the growth pattern. Section 4 provides statistical sources and the assumptions of the study. Section 5 contains the empirical part of the study. Section 6 discusses the empirical results. Section 7 concludes the paper.
International institutions (United Nations [UN], 2000; Organisation for Economic Co-operation and Development [OECD], 2007 define pro-poor growth as growth that benefits the poor and enables them to improve their economic situation. This definition is very vague and imprecise and therefore provides little guidance to its measurement or to formulate pro-poor policies. In recent years, there have been many proposals for a more specific definition of pro-poor growth (Essama & Lambert, 2009; Kakwani, et al., 2004; Klasen, 2008; Kraay, 2006; Ravallion & Chen, 2003; Son & Kakwani, 2008).
The proposed definitions can be classified under two basic approaches to pro-poor growth: namely, absolute and relative. The distinction is related to the general concept of measuring poverty and inequality. According to the absolute approach, the process of growth is considered favourable to the poor if the wealth (measured by incomes) of the poor increases (Klasen, 2008). This approach does not compare the distribution of benefits of growth between the poor and the non-poor. Furthermore, Klasen distinguishes between ‘strong’ and ‘weak’ absolute growth favoring the poor. The strong absolute growth favouring the poor occurs when the growth income gains of the poor are larger than the income gains of the non-poor. The weak absolute growth favouring the poor occurs when the incomes of the poor increase in absolute terms; however, the incomes of the non-poor increase even more (growth rate of the poor’s incomes is greater than 0). The weak absolute pro-poor growth implies that growth is pro-poor if it reduces poverty (Ravallion & Chen, 2003). Most of the growth processes can be classified as weakly pro-poor in absolute terms.
Duclos (2009) argues that the absolute approach should be applied in underdeveloped countries, where a significant part of the population obtains incomes below the subsistence level. In these countries, the income redistribution policy should focus on poverty reduction in absolute terms to provide for the most basic needs.
The relative approach focuses on distribution of growth benefits between the poor and the non-poor population. Within the relative approach, growth is considered to be favourable to the poor if the wealth of the poor grows faster than wealth of the non-poor (Klasen, 2008), i.e., when economic growth reduces income inequality. Within the relative approach Kakwani and Son (2008) recognize two kinds of the relative pro-poor growth: a relatively pro-poor growth and an absolutely pro-poor growth. Both approaches verify whether the distribution of the benefits of growth favours the poor as compared to the non-poor, However, growth relatively pro-poor leads to a decline in a relative inequality, whereas growth absolutely pro-poor leads to a decline in an absolute inequality (Grosse, et al., 2008). The relative approach should be applied as a supplement to the absolute approach in developed countries (Layard et al., 2010). Although the income redistribution policies should always be mainly focused on ensuring the physical existence of the poorest groups of the society, in the case of developed countries, their secondary goal should focus on preventing too much income inequality. Within the relative approach, changes in the poverty sphere are analysed on the basis of both growth and distribution of incomes among the poor and the non-poor. Consequently, growth is described as pro-poor in relative terms only if it leads to reduction of both poverty and income inequality.
Kakwani, et al. (2004) provide classification of the growth pattern analysis methods distinguishing partial and full methods. Within the partial approach, the analysis does not require defining any poverty indices or poverty lines. Analysis of the nature of growth is based on stochastic domination curves (Panek, 2011). When stochastic dominance conditions are not met, the pro-poorness of growth cannot be assessed; hence, the approach is called ‘partial’. The full approach needs to be based on poverty measures. As a result, it allows for the relevant assessment in every situation.
The growth pattern indicators under the full approach are based on the elasticity of poverty measures with respect to economic growth. Kakwani & Subarrao (1990) proposed decomposing the changes in poverty into growth and inequality components. The poverty elasticity is estimated using the Lorenz curve. Similarly, Kakwani & Pernia (2000) proposed comparing the changes in poverty indices resulting from changes in income inequality with hypothetical changes, which would occur if the shape of income distribution remained constant and only the mean income changed.
Poverty indices can be characterized by the poverty line (
Changes in a poverty index between the initial period – the growth component ( – the inequality component (
The change in poverty index (
Kakwani (2000) defined the two components as follows:
The total growth elasticity of poverty is defined as the ratio of the proportional change in poverty to the proportional change in the mean income. We can estimate it as the total differential of the expression,
The decrease in the poverty index is influenced by both the increase in mean income and the decrease in the inequality. Hence, the total growth elasticity of poverty can be presented as the sum of the relative growth elasticity of poverty (
The components of Equation (8) can be expressed as
Generally, the total growth elasticity of poverty (
The growth elasticity of poverty (
Ultimately, when growth is pro-poor (not pro-poor) in relative terms, the total growth elasticity of poverty is lower (greater) than the neutral growth elasticity of poverty. Based on the decomposition of the poverty index, Kakwani and Pernia (2000) defined the pro-poor growth index (PPGI), in the relative sense, as the ratio of the total growth elasticity of poverty to the relative growth elasticity of poverty:
When the PPGI is greater than 1, the inequality elasticity of poverty is negative (
During a recession, the mean income growth rate is negative (
The recession will be described as favouring the poor when
For assessing whether growth is absolutely pro-poor (sometimes called strong absolute pro-poor growth) Kakwani and Son (2008) proposed the absolute pro-poor growth index (
In order to assess the extent to which growth reduces poverty, Kakwani et al. (2004) proposed a modified measure that includes the actual incomes growth rate. They defined the poverty equivalent growth rate (
A positive
During recession (
To determine whether growth is pro-poor in the relative sense, we can rewrite
Growth is pro-poor (strictly pro-poor) in the relative terms if
Growth is pro-poor in the absolute terms (strictly absolutely pro-poor) if
The directions of changes in the values of the The headcount ratio, which is a share of individuals with incomes falling below the poverty line, measures poverty incidence. The poverty gap index measures poverty depth and is defined as an average shortfall of the total population from the poverty line. The Watts index measures poverty severity, taking into account together poverty incidence, poverty depth, and income inequality between the poor.
The partial approach allows for determining whether growth patterns reduce poverty in the absence of formal poverty measures. Ravallion and Chen (2003) introduced a framework for measuring pro-poorness of growth using growth incidence curves (GICs). The GIC is a graphical tool that visualizes the rate of income growth for each percentile of the non-decreasing income distribution. The income
Letting
The quantile growth rate (
Identification of the growth pattern based on the GIC uses the concept of the first-order stochastic dominance (Atkinson, 1987; Foster & Shorrocks, 1988; Panek, 2011; Ravallion, 1994). Let
When the quantile growth rates for the entire population are monotonically decreasing, the growth is favourable to the poor in the relative sense, regardless of whether it is positive or negative. It follows from Equation (18) that if the Lorenz curve does not change, then This axiom states that the transfer of income from a poorer individual to a richer individual should increase income inequality.
However, usually GIC has a different sign for various values of Headcount ratio ( The
The
In the empirical research, the
The empirical analyses are based on the data from the EU-SILC. EU-SILC started in 2003 and was fully implemented in all European Union (EU) countries by 2005. Serbia joined the research in 2012. Therefore, we use EU-SILC data for six Balkan countries from 2012 to 2017.
EU-SILC is conducted using a rotational panel method in a four-year cycle. In every country, an initial sample is divided into four subsamples with the same size and structure. Starting from the second year, one of the four subsamples is removed and another subsample with the same size and structure is drawn. Ultimately, each subsample is meant to last four years.
The survey results are weighted to represent the size and structure of the entire population for each EU member state. The sample size differs across countries, as it can be equal to as low as 4,000 households or as high as 20,000 households. Missing data on incomes is imputed using various methods of data imputation in different countries.
The assessment of the growth pattern based within the axiom of anonymity does not require observation of the same individuals in two analysed periods. Nevertheless, we used a sequence of two-year panels from the 2012–2017 period. This allows for mitigation of the sampling error, which is higher for cross-sectional data. Since we based our analyses on panel data, the
The empirical analysis is based on individuals’ equivalent incomes. Income is defined as yearly household equivalent disposable income in the last year preceding the survey. All incomes were adjusted using relevant CPI indices with 2012 as the base. The equivalent disposable incomes were calculated by dividing disposable household income by the OECD modified equivalence scale. The modified OECD scale assigns a value of 1 to the first household member, 0.5 to every additional household adult member, and 0.3 to each child. The disposable income is defined as a sum of net monetary income gained by all households’ members. It does not take into account any fringe benefits (with exception of the company car) and other non-monetary incomes. Each individual is assigned a value of his household’s equivalent income. Negative incomes were changed to zero.
In our empirical analysis, some modification of the
To identify the impoverished and calculate poverty indices, poverty lines need to be defined. The national poverty lines were calculated for 2012 as 60% of the national median equivalent income. This corresponds to the poverty lines’ definition implemented by Eurostat. However, for the following years we used the same 2012 poverty lines. Poverty indices used in the study focus on the three basic poverty aspects, e. g. on its incidence (headcount ratio
The headcount ratio was applied. although the
Economic growth (an increase in GDP per capita) was generally accompanied by an increase in mean equivalent income in all six Balkan countries (Table 1). However, in Bulgaria and Greece in the 2013–2015 period, a significant decrease in mean income occurred despite an increase in GDP per capita. Moreover, in Croatia and Slovenia, the mean equivalent income increased despite the decline in GDP per capita in the 2012–2013 period.
Annual Growth Rate of Incomes and Changes in Poverty Indices for Balkan Countries during 2012–2017
Bulgaria | ||||
2012–2013 | 0.123* | −0.053* | −0.012* | |
2013–2014 | −0.011 | 0.012* | −0.002 | −0.006 |
2014–2015 | −0.027* | 0.008* | 0.006* | 0.009* |
2015–2016 | 0.152* | 0.003 | 0.002 | 0.004 |
20162017 | 0.017 | −0.016* | −0.012* | −0.031* |
Greece | ||||
2012–2013 | −0.067* | 0.043* | 0.005* | −0.039* |
2013–2014 | −0.023 | −0.002 | 0.002 | 0.056* |
2014–2015 | −0.008* | 0.005 | 0.002 | 0.002 |
2015–2016 | 0.034* | −0.035* | −0.017* | −0.044* |
2016–2017 | 0.041* | −0.027* | −0.020* | −0.065* |
Croatia | ||||
2012–2013 | 0.012* | −0.005 | −0.002 | −0.007 |
2013–2014 | 0.022 | −0.003 | −0.001 | 0.003 |
2014–2015 | 0.027* | −0.024* | −0.008* | −0.018* |
2015–2016 | 0.064* | −0.018* | −0.009* | −0.014* |
2016–2017 | 0.077* | −0.017* | −0.009* | −0.012* |
Romania | ||||
2012–2013 | 0.077* | −0.021* | −0.004* | −0.007 |
2013–2014 | 0.016 | −0.012* | −0.006* | −0.011* |
2014–2015 | 0.018* | −0.016* | −0.008* | −0.002 |
2015–2016 | 0.085* | −0.034* | −0.015* | −0.040* |
2016–2017 | 0.218* | −0.040* | −0.013* | −0.022* |
Slovenia | ||||
2012–2013 | 0.019* | −0.004 | −0.001 | −0.001 |
2013–2014 | 0.013* | −0.006* | −0.003* | −0.004* |
2014–2015 | 0.006* | −0.011* | −0.003* | −0.004* |
2015–2016 | 0.045* | −0.027* | −0.007* | −0.009* |
2016–2017 | 0.060* | −0.021* | −0.006* | −0.008* |
Serbia | ||||
2012–2013 | 0.030* | −0.016* | 0.006* | 0.021 |
2013–2014 | 0.008 | 0.021* | 0.011* | 0.060* |
2014–2015 | 0.006 | −0.016* | −0.004 | −0.042* |
2015–2016 | 0.055* | −0.029* | −0.019* | −0.001 |
2016–2017 | 0.067* | −0.039* | −0.012* | −0.039* |
Source. Own analysis based on EU-SILC (2012–2017).
Note. * indicates that the estimates are significant at the 0.05 level.
A significant increase in mean income was generally accompanied by a significant decrease in poverty or the lack of significant changes in poverty incidence in all the analysed countries and for all periods. The notable exception is the significant increase of poverty incidence in Serbia in the 2012–2013 period. On the other hand, a significant decrease in equivalent income resulted in a significant increase in poverty or no significant changes for all countries and periods. Only in Greece during the 2012–2013 period did poverty severity decrease because of a decline in income inequality among the poor despite the decline in mean income for the whole population.
Table 2 summarizes estimation of – Greece in 2013–2014 (both in the relative and the strong absolute senses); – Slovenia in 2012–2013 (only in the relative sense); – Serbia in 2013–2014 and 2014–2015 (both the relative and the strong absolute senses).
Annual Growth Rate in Income and PEGRs for Balkan Countries during 2012–2017
Bulgaria | |||||||
2012–2013 | 0.123* | 0.068* | 0.166* | 0.051* | 0.045* | 0.115* | 0.031* |
2013–2014 | −0.011 | −0.013 | 0.226* | 0.006 | −0.017 | 0.230* | −0.001 |
2014–2015 | −0.027* | −0.058 | −0.025* | −0.039* | −0.108 | −0.025* | −0.055* |
2015–2016 | 0.152* | −0.009 | 0.059 | −0.037 | −0.004 | 0.052 | −0.013 |
2016–2017 | 0.017 | 0.015 | 0.019 | 0.018 | 0.009 | 0.022 | 0.016 |
Greece | |||||||
2012–2013 | −0.067* | −0.116* | −0.068* | −0.036* | −0.149* | −0.063* | −0.011 |
2013–2014 | −0.023* | 0.478* | −0.018 | −0.024* | 0.86* | −0.016 | −0.026* |
2014–2015 | −0.008* | −0.015 | −0.008 | −0.013 | −0.018 | −0.007 | −0.017 |
2015–2016 | 0.034* | 0.024* | 0.033* | 0.028* | 0.020* | 0.032* | 0.025* |
2016–2017 | 0.041* | 0.024* | 0.044* | 0.036* | 0.018* | 0.049* | 0.033* |
Croatia | |||||||
2012–2013 | 0.012* | 0.005 | 0.004 | 0.009 | 0.004 | 0.011 | 0.006 |
2013–2014 | 0.022* | 0.006 | 0.023 | 0.036 | 0.004 | 0.025 | −0.021 |
2014–2015 | 0.027* | 0.020* | 0.034 | 0.021* | 0.016* | 0.018 | 0.018* |
2015–2016 | 0.064* | 0.028* | 0.101* | 0.038* | 0.018* | 0.012* | 0.026* |
2016–2017 | 0.077* | 0.036* | 0.087* | 0.044* | 0.021* | 0.080 | 0.028* |
Romania | |||||||
2012–2013 | 0.077* | 0.034* | 0.097* | 0.021 | 0.022* | 0.092* | 0.013 |
2013–2014 | 0.016 | 0.011 | 0.021 | 0.012 | 0.008 | 0.021 | 0.010 |
2014–2015 | 0.018* | 0.013* | 0.022 | 0.005 | 0.010 | 0.021 | 0.002 |
2015–2016 | 0.085* | 0.050* | 0.183 | 0.064* | 0.034* | −0.403 | 0.049* |
2016–2017 | 0.218* | 0.106* | 0.125* | 0.102* | 0.058* | 0.091* | 0.053* |
Slovenia | |||||||
2012–2013 | 0.019* | 0.066 | 0.018 | 0.005 | 0.005 | 0.012 | 0.004 |
2013–2014 | 0.013* | 0.007* | 0.013* | 0.009* | 0.005* | 0.011 | 0.007* |
2014–2015 | 0.006* | 0.005 | 0.052 | 0.005 | 0.004 | 0.002 | 0.005 |
2015–2016 | 0.045* | 0.028* | 0.031 | 0.029* | 0.022* | 0.027 | 0.022* |
2016–2017 | 0.060* | 0.034* | 0.042* | 0.036* | 0.023* | 0.034* | 0.025* |
Serbia | |||||||
2012–13 | 0.030* | 0.021* | 0.032* | 0.008* | 0.015* | 0.031* | 0.009 |
2013–14 | 0.008 | 0.012 | 0.001 | 0.009 | 0.017 | 0.002* | 0.009 |
2014–15 | 0.006 | 0.010 | 0.011 | 0.010 | 0.008 | 0.006 | 0.010 |
2015–16 | 0.055* | 0.031* | 0.117 | −0.021* | 0.021* | 0.070 | −0.012* |
2016–17 | 0.067* | 0.049* | 0.055* | 0.052* | 0.035* | 0.041* | 0.039* |
Source. Own analysis based on EU-SILC (2012–2017).
Note. * indicates that the estimates are significant at the 0.05 level.
Interesting to note, during a 2013–2014 recession in Greece, the mean incomes of the poor fell less as compared to the non-poor.
In most countries, economic growth had a much more positive impact on reducing poverty depth than poverty incidence. With respect to poverty depth, economic growth turned out to be pro-poor in Bulgaria, Croatia, Romania, and Serbia for the majority of analysed time frames. This means that the growth benefited the poorest of the poor in these countries and periods as the inequality between the poor decreased. The only exceptions to this rule were Greece in 2013–2014 and Serbia in 2014–2015, where growth was beneficial for the poor in terms of both poverty incidence and poverty depth.
We have observed pro-poor growth (both in the relative and the absolute senses) associated with poverty severity (Watts index) only for five countries/periods:
– Bulgaria, Croatia and Serbia in 2013–2014; – Greece in 2012–2013; – Serbia in 2014–2015.
Moreover, growth was pro-poor with respect to poverty severity in Bulgaria in 2016–2017, but only in the relative sense.
Analysing the nature of growth in terms of combinations of different aspects of poverty, we find that in Bulgaria, Croatia, and Serbia in 2013–2014, growth was pro-poor with respect to poverty depth and severity (in Serbia only in the relative sense). Furthermore, in Serbia in the 2014–2015 period, where
Table 3 compares the values of the
Annual Growth Rates in Income and RPPG for Balkan Countries during 2012–2017
Bulgaria | ||
2012–2013 | 0.131* | 0.110* |
2013–2014 | −0.001 | 0.063* |
2014–2015 | −0.034* | −0.070* |
2015–2016 | −0.105* | −0.014 |
2016–2017 | 0.043* | 0.227* |
Greece | ||
2012–2013 | 0.005 | 0.269* |
2013–2014 | −0.023* | −0.040 |
2014–2015 | 0.000 | 0.012 |
2015–2016 | 0.076* | 0.201* |
2016–2017 | 0.079* | 0.207* |
Croatia | ||
2012–2013 | 0.012* | 0.026 |
2013–2014 | 0.017* | −0.003 |
2014–2015 | 0.045* | 0.111* |
2015–2016 | 0.074* | 0.105* |
2016–2017 | 0.086 | 0.114* |
Romania | ||
2012–2013 | 0.068* | 0.055* |
2013–2014 | 0.027* | 0.030* |
2014–2015 | 0.036* | 0.069* |
2015–2016 | 0.091* | 0.077* |
2016–2017 | 0.226* | 0.194* |
Slovenia | ||
2012–2013 | 0.018* | 0.010 |
2013–2014 | 0.017* | 0.038* |
2014–2015 | 0.011* | 0.038* |
2015–2016 | 0.056* | 0.089* |
2016–2017 | 0.066* | 0.091* |
Serbia | ||
2012–2013 | 0.048* | 0.088* |
2013–2014 | −0.033* | −0.139* |
2014–2015 | 0.258 | 1.023 |
2015–2016 | 0.074* | 0.023 |
2016–2017 | 0.191* | 0.635* |
Source. Own analysis based on EU-SILC (2012–2017).
Note. * indicates that the estimates are significant at the 0.05 level.
According to this measure, growth was in general pro-poor during the whole analysed period (Table 3). It was not beneficial to the poor in weak absolute terms only in Greece, Croatia, and Serbia in 2013–2014 and in Bulgaria in the 2014–2016 period. The economic growth was pro-poor in Romania and Slovenia over the whole period considered. Moreover, during the 2013–2014 period in Bulgaria, a positive value of the
The
Table 4 summarizes all the obtained empirical results (compare Tables 2 and 3). Intuitively, we would expect that various pro-poor growth measures should indicate the same character of growth for each analysed country and period. However, as different measures stress different aspects of pro-poor growth, their values may lead to different conclusions.
Patterns of Growth in Balkan Countries during 2012–2017
Bulgaria | ||
2012–2013 | +* | +* |
2013–2014 | + | +* |
2014–2015 | −* | −* |
2015–2016 | − | − |
2016–2017 | + | +* |
Greece | ||
2012–2013 | −* | +* |
2013–2014 | −* | − |
2014–2015 | − | + |
2015–2016 | +* | +* |
2016–2017 | +* | +* |
Croatia | ||
2012–2013 | + | + |
2013–2014 | + | − |
2014–2015 | +* | +* |
2015–2016 | +* | +* |
2016–2017 | +* | +* |
Romania | ||
2012–2013 | + | +* |
2013–2014 | + | +* |
2014–2015 | + | +* |
2015–2016 | +* | +* |
2016–2017 | +* | +* |
Slovenia | ||
2012–2013 | + | + |
2013–2014 | +* | +* |
2014–2015 | + | +* |
2015–2016 | +* | +* |
2016–2017 | +* | +* |
Serbia | ||
2012–2013 | +* | +* |
2013–2014 | + | −* |
2014–2015 | + | + |
2015–2016 | −* | + |
2016–2017 | +* | +* |
Note. + indicates a pro-poor growth, − indicates a non-pro-poor growth and * indicates that the estimates are significant at the 0.05 level.
In order to establish the comparability of the results, we need to recall the assumptions of the applied measures. First, values of both
This difference is well illustrated by the assessment of changes in income distribution that occurred in Greece during the recession of the 2012–2013 period, as values of
Second, the values of
Third, comparative analysis should focus primarily on the estimates of pro-poor growth measures that are statistically significant. During our empirical analysis, while calculating relevant measures for bootstrap subsamples, we found that not-significant estimates of both
Considering these three remarks, the results presented in Tables 2 and 3 show that the assessment of the growth pattern is generally consistent for both applied measures in terms of poverty reducing growth. Summing up, significant poverty reducing pro-poor growth was observed for the following countries and periods:
– Bulgaria in 2012–2013; – Greece and Romania in 2015–2017; – Croatia in 2014–2017; – Slovenia in 2013–2014 and 2015–2017; – Serbia in 2012–2013 and 2016–2017.
It is often speculated that the higher extent of social benefits should favour the pro-poor growth as part of incomes is directly transferred to the poor. In order to empirically verify this notion, we define social benefits to the poor ( We used a mean difference between total household incomes (HY020) and total household incomes before social transfers other than old-age benefits (HY022) as an estimate for mean direct social transfers.
We estimated the average social benefits to the poor using the EU-SILC database. Figure 1 presents the relation between the social benefits to the poor and the
Considering all data points, it seems that there is no evident relation between social benefits and pro-poor growth, as the regression line is approximately horizontal across the whole range of social benefits values and a linear correlation coefficient is negligible (
Contrary to intuition, countries with the highest levels of social benefits to the poor (Slovenia, Croatia) did not experience the highest values of the
It is possible that the effectiveness of social transfers in poverty eradication depends on the development level, general wealth, and the poverty level in any given country. It may be easier to combat poverty using social transfers in countries with relatively high poverty rates (Romania, Bulgaria) as compared to countries with lower poverty rates (Slovenia, Croatia).
As the
It turned out that the relationship between the social benefits and
Designers of policies aimed at combating poverty should consider the relationship between economic growth and income distribution. Particularly, the impact of economic growth on the incomes of the poor should be investigated and understood so that the social policies facilitate the poor to participate in the fruits of economic growth. This study presents and implements a set of statistical measures that are designed to inform policymakers on whether the economic growth favour the impoverished.
The theoretical part of the study provides the definition of the pro-poor growth and distinguishes between pro-poor growth in absolute and in relative terms. Moreover, the theoretical foundations of the construction of pro-poor growth measures were presented, and their basic advantages, limitations, and potential comparability were discussed.
In order to answer our research question of whether growth in the Balkan countries was pro-poor, we calculated and analysed the wide range of pro-poor growth measures using the most up-to-date panel data sets available. These were the poverty equivalent growth rates (
Generally, growth was significantly poverty-reducing only in Greece and Romania in 2015–2017, Croatia in 2014–2016, Slovenia in 2013–2017, and Serbia in 2016–2017. The growth pattern was significantly non-poverty-reducing only in Bulgaria in 2014–2015. Different indicators of growth patterns yielded similar results; however, in the case of Greece in 2012–2013, values of
Throughout all analysed countries, growth patterns tend to be more poverty-reducing or pro-poor in times of faster economic growth. It was also shown that the level of social benefits to the poor does not directly influence the pro-poor nature of the economic growth. The reasons for which countries differ with respect to the pro-poor nature of economic growth require further theoretical and empirical research.