Growth, inequality and poverty during a process of institutional change

This paper aims first of all to explore the social sustainability and the quality of economic growth in a sample of 50 Emerging and Transition Economies (ETEs), which are countries experiencing a process of fast growth and institutional change in most cases. Through a series of cross-country regressions, using OLS models, the paper assesses the type of development in those countries. Economic growth during 1995-2006 is regressed against poverty, inequality and human development variables. The main findings are that growth did not reduce poverty and that income inequality, measured as a reduction of Gini coefficient between the years 1993-2004, worsened too. From one side, economic growth in ETEs occurred despite the worsening of income inequality. However, this result does not identify a “U-shaped” Kuznets curve because even after a consistent period of economic growth, inequality did not decrease and it remained at higher levels. Only countries with higher education levels and public expenditure in strategic dimensions seem to escape from this trap. On the other side, economic growth occurred at the expense of an important human development variable i.e., life expectancy, and at the expense an important indicator of political democracy, i.e., Voice and Accountability.