This paper describes changes in income distribution and poverty in Albania during the transition period 1991-93, drawing particular attention to the role of price liberalization and terms of trade shifts in favor of agriculture, an increase in unemployment in the state sector, emigrant remittances, and social safety nets. The study covers private agriculture, state enterprises, the civil service, pensioners, the unemployed receiving benefits, and those on social assistance. It presents estimates of average agricultural incomes by district based on acreage, number of livestock, yields, and urban household income distribution. As a check on the results, developments in per capita consumption of food items are examined.
According to income and remittance data, real incomes in the rural sector increased by about 50 percent between 1991 and 1993. Real urban incomes, including government transfers, declined by 12 percent between the first half of 1991 and the second half of 1993, and the share of the urban population with incomes below subsistence levels increased from about 6 percent to 25-30 percent. The ratio of presumptive agricultural income to public sector income increased from 1/2 to 1 between 1991 and 1993. Consumption data indicate that per capita food consumption increased in urban areas, implying that a large decline in urban real incomes and an increase in poverty are implausible.
The incomes of the recipients of government transfers who also receive remittances from abroad--that is, the incomes of half the government transfer recipients--exceeded the poverty line. The incomes of the other half fell below the poverty line.
The policy implications are that (1) targeting will be cost-effective and (2) an increase in benefit levels is necessary for those with incomes currently below subsistence levels. Recent government initiatives--block grants to communities and self-targeted public works--are in line with these prescriptions.