Poverty—A Challenge for Economic Development? Evidences from Western Balkan Countries and the European Union

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.