Determinants of Poverty in Albania

Poverty is a widespread phenomenon in all over the world. Measurement and analysis of poverty is needed to identify the poor, the nature and extent of poverty and its determinants, and to assess the impact of policies and welfare programs on the poor. Based on Albania Living Standard measurement Surveys (LSMSs) data, after an overall improvement of the main indicators measuring the poverty from 2002 to 2008, the percentage of population living in poverty has increased by 15.4% from 2008 to 2012 (INSTAT and World Bank, 2013). The results of LSMS 2012 data indicated an increase of poverty in both urban and rural areas, and the increase was higher in urban area. The aim of this study is to identify the determinants of poverty in Albania, at the household level using a questionnaire. The objectives of this research were: to measure the level of poverty of the sample population, to determine the potential factors that impact poverty and to evaluate their impact on the level of the household’s welfare and poverty status of the household using econometric modeling. The data were collected during November 2013, and direct interviews were conducted with 215 households living in rural and urban area. Two regression models were estimated based on the collected data, a log-linear model with the logarithm of per capita monthly consumption as the dependent variable and a logistic model with poverty status as the dependent variable, and a set of economic and demographic variables as the explanatory variables. It was found that the variables that impacted the per capita consumption of the household and the poverty status of the household were household size and residence. Poverty alleviation efforts should be made to improve the social and demographic characteristics of the households, since the number of the poor is increased in both urban and rural areas. To reduce poverty, great attention must be paid to the manufacturing sector, agriculture and tourism.