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outcomes. Using a sub-national Brazilian panel time-series for the ’80 and first half of the ’90, Bittencourt (2009) finds that minimum wage policies in Brazil have been progressive.
Lastly, Fairris (2003) estimates, using counterfactuals, a significant reduction in wage inequality because of the presence of workers’ unions in Mexico. In turn, their effect is found to depend on the number of workers represented and on their ability to remove wage differences, between and within plants, due to observable characteristics (i.e., gender, geographical, education, occupation and industry differences). Indeed, the decline in unions’ coverage, changes in bargaining procedures and the need for maintaining low wages and high occupational flexibility to attract US investments have led to a rise in national wage inequality by 5.6%.
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conversion of the domestic currency. A consistent picture of the reforms appears in the following table.
TABLE 1 ABOUT HERE
The WTO accession is probably the most decisive move that brought Albania on the international scene while the participation to 8 RTAs is aimed at farther developing trade relationships with Albania’s closest neighbours and the EU in particular (Mancellari, 2005). All the trade liberalisation initiatives attempt to increase the Albanian level of commercial integration to better identify any likely comparative advantage based on productivity differentials as well as on technological and knowledge transfers (World Bank, 2004). Yet, having implemented the RTAs in the form of bilateral FTAs, the nations involved have missed out on the long term gains arising from these very same “soft” benefits; economies of scale and from a better negotiating position on the global trading markets, in particular (Grupe and Siniša, 2005 in Mancellari, 2005)3. Industry wise, the RTAs that Albania has signed are more advantageous in manufacturing (almost completely liberalized) than in agriculture. In fact, World Bank (2004) notes that Albania has significantly increased, in the 2000s, its export of construction and mining manufactured machinery towards the South Eastern Europe (SEE-84) economies while importing, from them, more raw materials.
In summary it seems that the picture of the Albanian export is quite fragmented, with respect to its destination: the SEE-8 countries seem to be a market suitable to absorb the rather capital intensive machinery for the construction and mining industries, the EU might continue to acquire the light manufacturing in leather and clothing while agricultural products may have a more international and global appeal (World Bank, 2004).
The Albanian agricultural land has historically been assigned to users without an adequate system of property rights (Deininger et al., 2007). The two most radical agricultural reforms in Albania occurred according to the 1945 Agrarian Law and the
3 Indeed, World Bank (2004) evaluates the Albanian experience in trade reforming suggesting that the most significant gains originated from the WTO accession and the preferential concessions from the EU. 4 The SEE-8 group includes Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Moldova, Romania and Serbia and Montenegro.
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Law 7501. The former eliminated private ownership and instituted a collective regime through the confiscation of large possessions, redistribution of parcels and the consequent creation of agricultural production cooperatives and state farms. The latter initiated a post-communism redistribution of the agricultural land, on a per-capita basis, to those farm workers and farmers which used to work and own the land before its collectivisation. Therefore, the 550 formerly state and collective farms were split up into small parcels of about one hectare and distributed to 460,000 private owners5 (World Bank, 2002a). Deininger et al. (2007) report that Kelm et al. (2001) note that the Albanian families which belonged to agricultural production cooperatives were granted inexpensive ownership rights while those working on state farms received use rights only but benefitted from the redistribution of livestock, orchards and fruit trees.
Yet, the subsequent efforts at fine tuning the change in land structure were poorly managed such that the final result was a skewed allocation of agricultural machinery and farm equipment which sometimes were looted (Civici, 2001 in Deininger et al., 2007). Moreover, the reform process which dismantled the collectivist land management caused major tensions on the location of village borders (Deininger et al., 2007) and limited maintenance and innovation of several relevant agricultural infrastructures.
Unfortunately, despite the sweeping reforms undertaken so far, present Albania seems rather underdeveloped, compared to several neighbouring countries, according to a number of economic indicators (Mancellari, 2005). Kaltani (2007) provides a detailed assessment of the Albanian stage of development using the SEE-8 countries and the transition economies at large as a benchmark. The analysis concerns areas such as educational investment, financial depth, telecommunication infrastructures, governance, labour market flexibility and firm creation. Kaltani (2007) compares the country’s current performance in each area with the one that would be predicted by its per capita GDP level. The resulting picture is summarised in the following table.
TABLE 2 ABOUT HERE
5 Deininger et al. (2007) inform that, according to Mathijs and Swinnen (1998) the Albanian reform strategy was somewhat unique in the former communist world since it was replicated only in Romania.
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Kaltani (2007) recognises that Albania is underperforming in some aspects of infrastructure provisioning, financial development, public expenditure for education and of the adequacy of the legal system. On the other hand, a few characteristics of the labour market seem fairly well developed.
Kaltani (2007) reports that, according to World Bank (2006b), Albania has recorded a significant rise in the growth rate of private credit from a very low initial level.
Nonetheless, the whole financial sector still lacks the rules and regulations for an efficient functioning. Forms of credit rationing still exist such that it is claimed that formal institutions finance individuals already flushed with cash (King and Mai, 2008). Similarly, the copious remittances from international migrants, which according to IMF (2005) in Azzarri et al. (2008) have topped 14% percent GDP or 1.7 times the value of exports in 2004, cannot be considered a suitable source of development finance substituting for a formal, well-functioning credit system. In fact, only at times a significant share of these privately transferred funds has been devoted to productive investments (McCarthy et al., 2006).
Despite the adequate level of acquired education in Albania, given the current level of per capita GDP6, Kaltani (2007) echoes that UNICEF (2003) ascertains that in 2002 Albania spent only 2.6% of its GDP on education. Dropping out from school has increased largely due to the higher incidence of the cost of transportation to school and because of the government reneging on, among others, teacher training and school maintenance (Meurs et al., 2008).
The legal system seems to have failed to generate trust because the courts are not impartial enough. This has caused a widespread violation of national laws (Broadman et al., 2004 cited in Kaltani, 2007). For instance, Bozgo et al. (2002) report the resurgence of blood feuds to settle disputes over land ownership and tenure in northern Albania. Weak courts and legal institutions might hinder the finalisation of prospective investment agreements and disrupt business relations which rely on the straightforward and fair enforcement of contracts. Yet, the possibilities of starting up a business in Albania are greater than those predicted by the national overall level of development. In fact, entrepreneurs do not seem hassled by significant red tape.
On a rather positive note, Kaltani (2007) suggests that it is quite easy to hire workers in Albania. The use of term contracts and the remuneration at the minimum wage are
6 This might largely be due to the lead that Albania had built, under the communist regime, over several neighbouring, in particular non-communist, countries (Azzarri et al., 2008).
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practices which are not significantly discouraged. Likewise, it seems that firms are not always required by the law to notify, and get permission from, either the unions or the labour ministry to shed jobs. On the other hand, it seems that Albania has fallen behind in allowing more weekend and night shifts to be scheduled and in providing workers with a minimum number of vocation days.