Poverty, inequality and growth in Albania

This paper studies the distribution of well-being and, specifically, the degree of poverty and deprivation in Albania, during 2002 and 2005, using Living Standard Measurement Surveys (LSMS). The distribution analysis is performed by applying both one-dimensional and multidimensional approaches, in particular to better examine the link between economic growth, inequality and poverty in Albania. Furthermore, by estimating a non-monetary indicator, as proposed by Bossert et al. (2007), and a non-linear principal component model together with a probit model, the paper focuses on the multidimensional measures of poverty to address the relationship between poverty and socio-economic factors. Our evidence shows that absolute poverty decreased from 2002 to 2005 while national relative poverty increased; economic growth reduced poverty in Albania over the observed period; and living in rural and mountain areas, being female, low educated and with large family increased the probability of suffering from deprivation.