WELFARE STATE CHANGE IN ALBANIA: COMPARING THE POLITICS OF PENSION AND HEALTHCARE REFORMS

In the early 1990s, the deep political and socio-economic transformations showed that the Albanian pension and healthcare models inherited from Communism were inefficient, close to the point of fiscal breakdown, as well as inequitable. In order to address these challenges, the Albanian government promoted a shift towards a social insurance model – which was said to represent the “good way”, i.e. a viable solution to build a stable and especially an effective social protection system. In both policy sectors the government’s ultimate goal was to link benefits to contribution records. Consequently, the Albanian pension and healthcare systems started to converge towards a Bismarckian social insurance model. However, reform implementation was constrained and, after three decades of reforms, the full shift to an insurance-based model has failed in both pensions and healthcare. The 2014 reform transformed the pension system into a mixed-occupational model – according to Ferrera’s terminology (Ferrera 1993) – made up of a social assistance scheme – a means-tested, poverty-relief social pension – and a social insurance, contributory scheme aimed at income maintenance. In the healthcare sector, the last wave of reform, started in 2014, aimed at transforming the system from a social insurance model to a universalistic social security one. These reforms thus led to a partial policy reversal, with the healthcare changing into a mixed-universalistic model, implying a combination of social security and social insurance – respectively financed by the state budget and social contributions. The pension and healthcare systems currently differ in terms of institutional architectures, financing methods, coverage and benefits. This policy change and divergence that exist between these two policy fields is puzzling, given their similar starting position in the early 1990s. The situation becomes even more ambiguous when we take into account the strong influence international actors, supporting neoliberal recipes, had on both systems since the very beginning. In fact, existing research on the Albanian welfare state development focuses on the role of international pressures to explain social policy change, according to which it is the external actors, not domestic ones, that have driven reforms. This strand in the literature, which stresses the role of international organisations in favouring policy diffusion, implicitly assumes that national political factors have limited or no effect on the relationship between (international) economic circumstances and social policy and that governments respond similarly to external constraints (Haggard and Kaufman, 2008). However, considering the important role played by the World Bank during the decision-making process, we should have seen convergence towards a single social model, i.e., neoliberal direction. Yet, empirically we observe a divergence over-time and between different social policy domains in Albania. This suggests that in order to understand policy change and variation we should look at other factors, such as internal political dynamics which is significantly missing from the existing literature. In addition, radical policy change and processes of convergence or divergence across policy sectors over-time have clear implications vis à vis historical institutionalism, according to which we should have seen path dependency. In fact, focusing only on institutions can hardly account for what is driving policy change in the first place (Jessoula, 2009), therefore, other factors have to be introduced, such as the role of actors’ interests and ideas. This thesis aims at filling this literature gap by contributing to the understanding of welfare state reforms in Albania in terms of policy, politics and theoretical analysis. More specifically, it aims at answering the following research questions: Why pension and healthcare policies converged into a Bismarckian social insurance model in the early 1990s? Why did implementation of the Bismarckian insurance model fail in both sectors? What explains subsequent developments towards a mixed-occupational model in pension and mixed-universalism in healthcare? To achieve these aims, this study provides a detailed empirical investigation in order to reconstruct the policy-making processes in both fields. Building on this analysis, this study argues that social policy reform can be understood as a process formulated through ideas (actors’ cognitive and normative frameworks) and shaped by conflicts and compromises between the relevant interests (political exchange dynamics) and their interplay with the institutions inherited from the past (policy legacies).