Social protection expenditure and redistribution in the Western Balkans

Abstract

This paper analyses social protection expenditure, its financing and its correlation with redistribution effects in the European Union (EU) candidate and potential candidate countries from the Western Balkans – Albania, Bosnia and Herzegovina, North Macedonia, Montenegro, Kosovo and Serbia. Although social expenditure in the Western Balkans varies between countries in terms of the extent and functions, in general, it is growing and concentrates on the elderly population. The expenditure is strongly redistributive towards old age, but is less efficient in reducing extensive child and working-age poverty. From an intergenerational perspective, despite various recent improvements, it remains significantly unbalanced compared to the EU. The expenditure reflects the design of social rights that have been shaped by the legacy of socialism and war, local politics, and international organisations perhaps more than by the impact of economic resources and aging.

The causal mechanisms behind expansive basic universalism in Kosovo

“…32%, between 2008 and 2021) without adjusting stringent eligibility criteria set in the post-war context (KAS, 2021b), and the SAS does not cover the majority of the poor population (World Bank, 2019: 43). By contrast, pensions, being more universal, reduce much more poverty even for the population under 65 years old than SAS (Mustafa and Gerovska-Mitev, 2022). In addition, again as the literature expects (Korpi and Palme, 1998), universal programmes (even if they are basic) are the main contributor to the size of the total social expenditure (Table 2) – which is an unusual expenditure structure for the region.…”

Introduction: social protection in the Western Balkans

“…Regressive taxation does little to moderate high levels of wage inequality in the labour market (Krstić, 2021). Social protection expenditure has had mild redistributive effects, especially through pensions (Casey, 2022); but even after redistribution, poverty and inequality remain high compared to the European Union (Mustafa & Gerovska-Mitev, 2022). High levels of unemployment have underpinned large-scale migration, especially from countries with a small production base such as Albania, Bosnia and Herzegovina and Kosovo (Ganić, 2019).…”

“…Today, the countries of the Western Balkans have markedly lower social expenditures on social protection than those in the European Union, with a major concentration on pensions rather than other social protection functions – such as family benefits, unemployment benefits, social assistance, housing and social inclusion – all of which are at very low levels (Mustafa & Gerovska-Mitev, 2022). Pension expenditure as a proportion of GDP is about 20 percentage points higher in Albania, Bosnia and Herzegovina, Montenegro and North Macedonia than in the European Union, although pension expenditure in Serbia has been held down by a World Bank austerity programme mandated in the mid-2010s.…”

“…They are also characterised by large particularistic social expenditures paid to war veterans (especially in Bosnia and Herzegovina and Kosovo) and politically privileged persons. A special case is Kosovo, which has very low levels of social expenditure due to a “caricature” neo-liberal social policy imposed by the United Nations Interim Administration Mission in Kosovo (UNMIK) that was in place from 1999 up to the unilateral declaration of independence in 2008 (Mustafa & Gerovska-Mitev, 2022).…”