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Two sources of growth are firm learning and innovation. Using a unique panel data for 1,686 firms in six countries (Bulgaria, Hungary, Latvia, Lithuania, Romania, and Turkey), this paper applies panel data estimators and Juhn-Murphy Pierce decomposition in order to identify the effects of the global economic crisis on sales growth of innovative and young enterprises in Eastern European countries. The results show that innovative and young firms were significantly more affected by the crisis than non innovative and older enterprises. The authors interpret these results as an indication that the achievement of pre-crisis growth rates in those countries may be difficult.

Achieving Shared Growth --- Annual growth --- Annual growth rate --- Business environment --- Corporate growth --- E-Business --- Economic Growth --- Economic growth --- Employment --- Entrepreneurship --- Finance and Financial Sector Development --- Financial crisis --- Financial Sector --- Firm size --- Firms --- Growth performance --- Growth prospects --- Growth rate --- Growth rates --- Human capital --- Industry --- International trade --- Macroeconomics and Economic Growth --- Merger --- Microfinance --- Negative impact --- Policy Research --- Poverty Reduction --- Private Sector Development --- Small Scale Enterprise

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Recent theoretical literature has suggested a variety of mechanisms through which poverty may deter growth and become self-perpetuating. A few papers have searched for empirical regularities consistent with those mechanisms - such as aggregate non-convexities and convergence clubs. However, a seemingly basic implication of the theoretical models, namely that countries suffering from higher levels of poverty should grow less rapidly, has remained untested. This paper attempts to fill that gap and provide a direct empirical assessment of the impact of poverty on growth. The paper's strategy involves including poverty indicators among the explanatory variables in an otherwise standard empirical growth equation. Using a large panel dataset, the authors find that poverty has a negative impact on growth that is significant both statistically and economically. This result is robust to a variety of specification changes, including (i) different poverty lines; (ii) different poverty measures; (iii) different sets of control variables; (iv) different estimation methods; (v) adding inequality as a control variable; and (vi) allowing for nonlinear effects of inequality on growth. The paper also finds evidence that the adverse effect of poverty on growth works through investment: high poverty deters investment, which in turn lowers growth. Further, the data suggest that this mechanism only operates at low levels of financial development, consistent with the predictions of theoretical models that underscore financial market imperfections as a key ingredient of poverty traps.

Capital investment --- Country case --- Credit constraints --- Debt Markets --- Development research --- Economic opportunities --- Economic Theory and Research --- Empirical estimates --- Empirical regularities --- Empirical studies --- Explanatory variables --- Finance and Financial Sector Development --- Financial development --- Growth equation --- Growth process --- Growth rates --- High poverty --- Human capital --- Inequality --- Macroeconomics and Economic Growth --- Negative impact --- Persistent poverty --- Policy research --- Poverty lines --- Poverty Monitoring and Analysis --- Poverty Reduction --- Poverty traps --- Pro-Poor Growth --- Rural Development --- Rural Poverty Reduction --- Services and Transfers to Poor