Decentralisation and Local Economic Development in Albania

Local governance in Albania has been the subject of several reforms over the last few years. The consolidation of local self-government units into 61 municipalities through the administrative and territorial reform was accompanied by the approval of a new law on local self-government, a new strategy for decentralization, and the devolution of some new functions to the local level. The completion of the legislative framework with a law dedicated to local finances was of particular importance for local governments. Nevertheless, while the available financial resources to the 61 municipalities are assessed to have followed an upward trend, their allocation seems to have had different effects on local economic development. Stronger decentralization and fiscal autonomy at the local level leads to better services for citizens, and theoretically translates into favourable conditions for promoting local economic development. This article assesses the relationship between the local government decentralization processes undertaken after 2010 in Albania and local economic development. The results, based on data for the period 2010-2018, are different for municipalities of different sizes, demonstrating the need to complement decentralization reforms with instruments that enhance local capacity and are tailored to local needs. Furthermore, it is concluded that these findings are introductory and not exhaustive, as long as a commonly agreed indicator approximating local economic development is not set. However, the assessment brings added value to the deepening of knowledge on the effects of decentralization policies on the local economy and can inform further steps towards fiscal decentralization.