Decomposition of Poverty Change: A Case Study

This paper investigates the impact of change in total population in decomposition of poverty change in Albania providing empirical illustrations with data from a country still in economic and social transition, even if in recent years has registered a high growth of GDP rate. To quantify the impact of change in total population, we use the methodology developed by Mishra (2015). In previous literature decomposing poverty change into growth and inequality effects, the impact of change in total population concealed by the hypothesis that the growth effect can be quantified by observing at the growth rate of mean income. The Mishra’s method considers the population growth as an independent within-group effect that results different respect to the inequality and growth effect respectively. Furthermore, this method integrates that to Son (2003) so that variation in population shares across groups represents the between-group effect. Thus, we will have three effects: growth on account of total income, inequality, and change in total population. These effects can be calculated in multiple possibilities depending on the sequence that each is computed and the base year.