The Effect of Economic Growth on Poverty in Eastern Europe

Economists have long been debating about the relationship between economic growth and poverty. In my research I am interested in the effect of economic growth on poverty and income inequality concerning upper-middle income Eastern European countries. I examine this relationship after 1990. Based on Adams’ research, my hypothesis states that in upper-middle income Eastern Europe economic development has significantly reduced income inequalities and poverty since 1990. Besides economic growth, I examine the effect of human development on poverty and inequality as well. To test my hypothesis, I carry out regression analysis and I use data from household surveys and national accounts. Results show that economic growth has had a signifi cant effect on poverty, but not on income inequalities since 1990. It means that economic growth can promote the decrease of the extent and the depth of poverty. Human development, however, has significant effect nor on poverty, neither on income inequalities. So if a country’s government is willing to decrease poverty, it has to concentrate on economic growth, rather than on human development.