Informal Economy in Albania

Merita Boka; Giuseppe Torluccio

Authors

Merita Boka PhD candidate in Financial Markets and Intermediaries Department of Management, University of Bologna, Italy.
Giuseppe Torluccio Associate Professor of Banking & Finance Department of Management, University of Bologna, Italy. Center for Research in Banking and Finance (CEFIN) University of Modena and Reggio Emilia, Italy.

Abstract

The main purpose of this paper is to assess the size of the informal sector of the economy in Albania by using indirect approaches: national accounts discrepancies, simple currency ratio, electrical energy consumption and some evidence by the labor market developments. A few studies have attempted to estimate the size of the informal economy in Albania in the previous years and there’s no evidence of recent estimates of informality (at least they are not publicly available), especially after 2007. Also, there are some other available studies which give some point assessments of informality in Albania but without information on its development over time. Using indirect measurement approaches we found that informality still accounts for a large share to GDP, but, differently from findings in other studies we found lower figures. This may be the result of vast reforms and a formalization process undertaken by the Albanian governments over time. Despite these results, it’s important to highlight the fact that the average ratio of the informal sector of the economy to GDP presents a declining trend over the period 1996 – 2012.

DOI: 10.5901/ajis.2013.v2n8p212