Allocative Efficiency in the service sector and productivity growth in Albania

Nowadays citizens of the modern world are living in an economy that is increasingly based on services. The service sector is not anymore, a minor part of the overall economy, but a major sector adding lots of value to the economy. The service industry represents the fastest growing economic sector.

The objective of the study is to analyze the service sector in Albania for the past few years and compare it with other countries within the European Union and countries in the Balkan area. Most of the work force in Albania is employed in the service sector, marketing numerous types of services to customers such as: food, personal care, entertainment, banking, insurance, transport, consultancy, tourism, office services, professional services, etc.


Over the last 20 years, Albania has transformed from an agricultural economy to a service-oriented economy. The service sector in Albania is new and dynamic. Two main services where foreign direct investment is oriented are telecommunications and financial intermediation, 23% and 33% respectively. Telecommunications is the most dynamic service sector in the Albanian economy. The main aim of this research paper is to portray an analytical view of the Albanian service sector, their quality and the future development.

The paper will provide information on services which are not well developed and have huge growth potential. The methodology employed in the paper is secondary research of accessible literature, statistic reports for OCED countries, EU countries from Euro stat, World Bank, Albanian Statistics Institute (INSTAT), as well as the Albanian Ministry of Finance and other recognized institutions.