Social Protection Expenditure and Sustainable Development for Reduced Inequalities: Insights from Albania’s Economy

This research examines the link between social protection expenditure (SPE) and economic performance in Albania, focusing on SPE's impact on growth and income distribution within a developing context. Utilizing panel data analysis and econometric modeling from 2019 to 2023, the study analyzes real GDP per capita (LGDP), SPE, and income inequality, measured by the top 1% income share. Techniques include unit root tests, cointegration assessments, longterm relationship estimations (DOLS and FMOLS), and causality tests. A 1% increase in SPE results in a 0.050% GDP per capita growth, while a 1% GDP rise leads to a 5.4% national wealth increase. Long-term cointegration between SPE and income inequality suggests that welfare spending reduces disparities. National income, national wealth market value, and GDP correlate positively, while the net wealth-to-income ratio negatively correlates with national income. Social protection expenditure promotes economic growth and reduces income inequality in Albania, aligning with SDG 10 objectives. The interrelationship between welfare spending and financial performance indicates that economic success fosters greater social protection investment. The findings highlight the need to prioritize social protection to support sustainable development and reduce inequality in developing countries. Future research should expand datasets and include cross-national comparisons to address sample size limitations.