The Structure of the Labour Market and Social Welfare Schemes in Kosovo,An Econometric, Comparative Analysis and Perspectives on Economic Sustainability
The Structure of the Labour Market and Social Welfare Schemes in Kosovo,An Econometric, Comparative Analysis and Perspectives on Economic Sustainability
DOI:
https://doi.org/10.5281/zenodo.18519042Keywords:
Underdeveloped markets, Fiscal sustainability, Social welfare schemes, Average wage, Labour cost, Econometric models, Formal employment, Sectoral inequality, Labour productivity, Remittances, Transition economyAbstract
This study examines the macroeconomic implications of the relationship between the labour market and the welfare system in Kosovo, with a particular focus on the emerging one-to-one ratio between formal workers and social beneficiaries. Using annual data from the Kosovo Agency of Statistics, the Ministry of Finance, Labour and Transfers, the Tax Administration of Kosovo and the Central Bank of Kosovo for 2012–2024, the paper applies a quantitative design that combines descriptive analysis with regression. Formal employment is modelled as a function of average net wages, the number of social beneficiaries, labour productivity and remittances. The results show that increases in labour costs, when not supported by corresponding gains in productivity, are associated with statistically significant reductions in formal employment, especially in the private sector. The expansion of social schemes is linked to higher fiscal pressure and a narrowing of fiscal space for development-oriented spending, while persistent public–private wage gaps distort labour allocation. Remittances stabilise household consumption but are negatively associated with formal labour-market participation in the long run. Overall, the findings indicate a pattern of economic fatigue and underscore the need for targeted reforms in wage-setting, welfare design and active labour-market policies to ensure long-term fiscal and economic sustainability.
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