Welfare Economics in Albania in Terms of Gross Domestic Product

Abstract

This paper is an attempt to explain the welfare economics in terms of GDP using the expenditure approach of GDP estimating. Thus, the assumption is that GDP measures the economic welfare and trying to identify which indicators does contribute more on it using the expenditure approach. The data used for this study has spanned over the period of 1992 till 2012 and taken from the World Development Indicators. The model consists of five variables including GDP, HCE, GE,GFCF, and T. The methodology to test the impact of these variables on GDP has been limited to the least squares method. The co-integration of the variables has been ascertained through application of graphical approach, correlogram test and Ljung - Box statistic. It is found to hold in the long run. The findings indicate that Albania’s welfare economics is positively affected by household consumption expenditure, government expenditure as well as gross fixed capital formation of private sector while trade has a negative impact.

DOI: 10.5901/ajis.2014.v3n4p343