Poverty and income distribution in the transition economies of central and eastern Europe and central Asia

Abstract

For the transition economies of Eastern and Central Europe and Central Asia, this study reveals that poverty and income distribution move in the same direction. Following a low income inequality and a target of zero poverty before 1989, the transition caused a worsening of distribution of income and wealth, and an increase in absolute poverty.

Using simple trend analysis, some factors that have a positive influence on poverty in these transition economies are the external debt ratio and the population growth rate, and some factors that have a negative influence on poverty are foreign aid, external debt, foreign direct investment, GDP growth, GDP per capita, exports, trade, domestic savings, HDI, life expectancy, and health expenditures.

A more rigorous econometric analysis shows significance only for corruption, GDP growth rate, GDP per capita, health expenditures and the human development indicator. Moreover, the $2 poverty line performs better in explaining the variation in poverty.

Still, these results must be looked upon with caution for several reasons. First, even though the sample size is large (23 out of 26 transition economies in CIS and CEE countries are studied here), the number of observations (from a statistical perspective) is rather small. Secondly, several explanatory variables are not accurately measured. Last but the most important, a study on countries undergoing many structural and institutional changes needs to be supplemented with other types of analysis, such as individual country studies.

Date of Award	2005
Original language	American English
Awarding Institution	Eastern Illinois University
Supervisor	Mukti P Upadhyay (Supervisor)