DETERMINANTS OF SUBJECTIVE POVERTY IN THE WESTERN BALKANS

Abstract

This study explores what drives subjective poverty in the Western Balkans, a region where many people still consider themselves poor despite two decades of economic growth and reforms. We provide evidence that the disconnect between measured income poverty and how people feel about their own poverty can undermine poverty reduction efforts and affect social cohesion during the EU accession process. Unlike earlier work that focuses mainly on income poverty, we offer a micro-level, cross-country analysis of subjective poverty in the six Western Balkan post-transition economies. Using data from the 2022–2023 Life in Transition Survey (LiTS IV), which covers 5,196 households in Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia, we examine how factors such as economic security, health, remittance income, COVID-19 impacts, and demographic characteristics influence individuals’ placement on a selfrated ten-step wealth ladder. We estimate generalized ordered logit models to re spect the ladder’s ordinal nature and to allow effects to differ across levels of subjective poverty. Our findings indicate that having financial buffers, owning a home, and being in good health significantly reduce the likelihood of feeling poor, whereas experiencing economic setbacks from the pandemic increases subjective poverty. Married individuals report greater subjective poverty, likely reflecting dependency and income-sharing not captured by income-based indicators. Cross-country differences are pronounced: Albania shows the highest levels of subjective poverty, whereas Kosovo the lowest. The evidence suggests that perceived vulnerability rather than income alone is a key driver of poverty assessments, highlighting the need for resilience-focused social policies during EU integration.

JEL: I32; O15; P36; C25.