Evidence from Albania: local government, public goods, and the free-rider problem

Public goods and their benefits are necessarily related to their nature. From an economic point of view, citizens are always looking for more and more public goods, judging that they should always finance them even less. Especially in a democracy, it is sufficient to remember that people who don't vote still benefit from the government's agenda. Mainly in developing countries and especially in ex-communist ones, the public does not have enough literacy and interest to understand the issues of public finance, political economy, the fiscal system, legal and political systems, social paradigms, and economics. So, it generally attributes the provision of public goods necessarily to the central and local governments without understanding or knowing any of the elements of the public goods ecosystem. So it seems that everything that the local government provides must be of high quality and be free, which proves evidence and traces of one of the main problems of public goods, which is the free-rider problem. From the research point of view, regardless of the moderation made by the civil society for the awareness of the social contract as well as the transparency of the economic activity of the municipalities, the citizens' awareness about the nature and problems of the provision of public goods still remains a concern. Therefore, the purpose of this article is to address the free-rider problem as an issue that must be recognized and considered so that optimal local legal regulations can be formulated, especially in small communities like Vlora municipality, where the free-rider problem is on a smaller scale compared to larger municipalities in the world.

JEL Classification: D70- Analysis of Collective Decision-Making: General; H41- Publicly Provided Goods: Public Goods; H70- State and Local Government, Intergovernmental Relations: General.

Introduction

In general, a public good is a non-excludable and non-rival service that the free market will underprovide. The primary characteristics of public goods, non-excludability and non-rivalry [Samuelson, 1954; Musgrave and Musgrave, 1976, as cited in Sciencedirect (n.d.)], have been viewed as sources of market failure in earlier economic literature, which has led to the necessity for state involvement. Similarly, Harris and Miller (2011) wrote that non-excludability states that no user of a good can forbid another user from using it, making it impossible to control or restrict access to the product. So, NISPAcee (1997) explain that:

This is the strategy of free-rider: to consume public goods without paying for it. However, if everyone attempts to be a free-rider, nothing will be provided and this is the basis of a possible rationale for government intervention. It is arguable that it is in everyone's interest to pay taxes to finance the production of non-excludable goods if the taxes are determined appropriately (p.73).

As cited in Acharya (2018):

In developing countries, the existence of local government is considered two-fold: they are playing key roles on funds, functions, and functionaries so that they deliver the services (Mathew and Hooja, 2009), while a high level of public trust fosters the ability to involve the citizens in democratic exercise, determine public needs, and maintain accountability (Sikhakane and Reddy, 2011) (p.37).

Ho (2021) writes that informal institutions and moral norms may be better able to explain the increased provision of public goods. So, informal structures known as social contracts help explain why some countries provide more public goods. According to Jean-Jacques Rousseau, Thomas Hobbes, and John Locke, a social contract is a pact between the state and society in which people consent to give up some of their rights in return for the government's promise to supply their needs (Ho, 2021).

Vogelsang et al. (2014) argue that free-riding is still possible with respect to public commodities that cannot be exhausted, or so-called non-rivalrous products, such as elected governments and public television (Feeny et al., 1990).

Webalkans (n.d.) argues that with a population of about 2.8 million, Albania has many difficulties in terms of governance and service provision. Despite tremendous advancements over the past few decades, Albania's governmental institutions still have problems with efficiency, accountability, and transparency. Decentralization, which began across the nation in 2014, attempted to alleviate some of these issues by giving local governments more control and authority over their own affairs. Decentralization, however, has encountered a number of challenges, including a lack of local capacity and resources (Webalkans, n.d.). So, according the Law No. 139/2015, Date 17.12.2015 (2015) “On Local Self-Government”, the basic unit of local self-government in Republic of Albania is the municipality.

In the framework of Law 139/2015, the municipality of Vlora (Vlora Municipality, n.d.), provide a large number of public services. All these public services definitely require their best provision and also constitute a direct link with the citizen, which emphasizes the important role of local government in the lives and wellbeing of citizens.

Vlora municipality profile

The last local elections in Albania were held on May 14, 2023. In general, the elections were well administered, but they turned out to be very polarized between the two main political parties in the country (OSCE, 2023).

Referring to Vlora Youth Center (2022), the municipality of Vlora has 104.827 residents, according to the 2011 Census (Source: INSTAT); however, the resident population listed in the municipality's civil registration for the year 2021 was 203.561 people (Source: Civil Register, Vlora municipality). Also, the population of Vlora region is 6.6% of the total Albanian population¹, and it had ~183.436 inhabitants on January 1, 2023, according to INSTAT (Albanian Institute of Statistics) (2023a). INSTAT (Albanian Institute of Statistics) (2023b) shows that in 2021, the GDP per capita in Vlora was around 567,000 ALL. The Albanian Association of Municipalities (n.d.) highlights that the new municipality of Vlora covers 616.85 km² and has a population density of 314.73 people per km². The city of Vlora serves as the municipality's unit center, and through the port of Vlora, the city of Vlora engages in some modest commercial activities. Tourism and agriculture, particularly the production of livestock and olives, are key economic drivers (The Albanian Association of Municipalities, n.d.). Similarly, the Romacted Program (2020) shows that more than 4,500 enterprises are active in the municipality, and income from these companies makes up the majority of its budget. They serve more than 150,000 wintertime residents and more than 300,000 summertime residents. The fishing sector is especially developed in Vlora, which is a significant commercial and nautical hub in Albania. Salt, bitumen, natural gas, and oil are all produced at Vlora. The building industry and textile manufacturing are also expanding (Romacted Program, 2020).

Specifically, referring to the cost of local government in Albania during 2016, the cost of local government and its services will be around 3 Euros per month for each resident, while the income from taxes and fees will be around 1.4 Euros per month for each resident. It should also be noted that in Albania, enterprises bear the greater part of the burden of contributing to local taxes (Local Finances, n.d.). According to Law No. 68/2017, Date 27.4.2017 (2017), local self-government units set fees for public services, ensuring access, quality, quantity, and affordability for all users. ALTAX (n.d.), however, reported the necessity of Vlora municipality for “more transparency, reliability, and increased effectiveness in spending to make it easier to be monitored by civil society organizations and the public.”

Method

Procedure

The aim of this study is to observe the perceptions and attitudes of the population about public goods, as well as the attitudes and behaviors of free-riders and their reasons, motivations, and patterns. The study is considered primary research, and its methodology is qualitative, supporting the aim of the study. Regardless of the fact that the study is qualified as a qualitative study, it can pave the way for a future quantitative study to test these phenomena and generalize the likelihood from the sample to the population. However, even in this preliminary study, which is necessary to test all the possible problems of a future study, several hypotheses have been explored. Even though they are qualitative, they pave the way for a future study on this issue, which may include other municipalities, a larger sample, and possibly random sampling, to enable the finalization of reliable and valid future quantitative research to test the hypotheses explored in this study and more.

Survey questionnaire

The research is based on the convenience sampling technique, and the study's data are collected through an online questionnaire because of its wide reach and accessibility. The main instrument of the study is a well-structured questionnaire distributed and administered online during 2 weeks with almost 42 questions and latent variables, addressed mainly to the citizens of the municipality of Vlora. The questionnaire is formulated and structured broadly and well, with key points from all areas of public goods, not only to capture in a latent way the opinions, attitudes, perceptions, approaches, and experiences of the sample through open and closed questions but also to collect valid and reliable data about issues, describe behaviors and attitudes, and explore them with the aim of generating new ideas for future research. The composite scale of good citizen². also used as the main variable in this study, is composed and measured through several attitudes and items based on Myers and Robertson (2016)³.

Data description

Data characteristics

About 105 individuals completed the research questionnaire, but only 82 interviewees are from the municipality of Vlore, while the other 23 are from municipalities such as Tirana, Fieri, and other local administrative units. In the sample of the study, are included only 82 interviewees from the main administrative unit of Vlora municipality⁴, due to the fact that the fiscal burden or the services they benefit from are the same. Most of the 82 interviewees are in the age group 25–54 (almost 84%), and 67% of them are female and 33% male. 74% of them have at least a higher education (a bachelor's or even a master's degree), and more than 50% of them are educated in the field of economics. 92% of the interviewees are employed, and even the majority have over 10 years of experience. 57% of them have a monthly family income of more than ALL⁵ 100,000. Almost 71% of those interviewed did not participate in public hearings; even 82% of them are regular voters. At least 50% of them are educated in the field of economics, and 63% of them have declared that they have knowledge about economics and demand for goods and services, resulting in answers and data that are more valid and rational. Regardless of the fact that the majority of the interviewees exercise their right to vote, almost 82% of them are not updated with political news, so the right to vote as a collective process is not very functional. Regarding the social contract, only 45% of them recognize it as an instrument and have knowledge about its importance. Regarding legal knowledge, only 39% of them declare that they know the general laws well. Also, in relation to the knowledge of the difference between public and private goods, two indexes or composite scales are used through the items of questions 24 and 40. Question 40 aims to understand if citizens do not associate public service with who offers it, so we understand that they make a difference as to what is a private or public good, so nearly 60% of them have classified public services completely correctly. Also, regarding question 24, which aims to understand, from the point of view of the characteristics of the goods, how well they know public goods vs. private ones, a perception that definitely affects even their attitude and behavior, it turns out that almost 70% have classified the public goods and private goods completely correctly in relation to their qualities such as non-rivalry and non-excludability.

Data analysis and research model

Market failure and free-rider problems referring to public goods are normal things to happen, but how did we capture and analyze them in this study?

To determine the profile of a free-rider, we used the good citizen scale⁶, composed of items 12–16, after assessing the value of Cronbach's alpha, which was 0.72 > 0.7, and only items 12, 13, 14, 15, and 16 were accepted, and items 17 and 18 were eliminated. The scale of a good citizen, with values ranging from 0 to 5, was then calculated based on these items. As for the performance of local government, only 13% of those interviewed expressed satisfaction with it, while almost 95% value the role of local government as very important. Also, regarding satisfaction (according to the composite scale through items 28) with the public services they benefit from, almost 83% are dissatisfied, but only 26.8% think that these services are very expensive (composite scale through items 29). This is also evident from single-item answers; for example, almost 92% are dissatisfied to neutral with the cleaning of the city, while only 82% assess it as neutral to not very expensive, assuming poor service quality or even the presence of free riders that reduce the service quality, something that should be taken into consideration to improve the quality of the public services, to prevent free-riders, or to raise the cleaning service tariff selectively.

Regarding the disposition to pay even more for the cleaning of the city regardless of how much they pollute, the interviewees are divided almost 50/50 between yes and no. This may implicate the fact that 50% do not agree to pay more because of free-riders taking advantage. Likewise, in relation to paying more taxes for better local service quality such as cleaning and greening, the citizens' answer were 48% no and 52% yes, and the majority of those interviewed would like the city's streets to be cleaned at least twice a day (almost 43%). In another question, the majority of interviewees, almost 69.5% of the sample, state that they value the quality of public services depending on their availability for all, which shows that the interviewees know the quality of public goods and value non-excludability, but this characteristic may encourage free-riders. Regardless of whether they seem to be absent among the interviewees, the presence of free-riders in the community is defined and shown by the answers given by the interviewees; for example, almost 47.6% of them do not agree that they should pay all the same for public services, which may be because they fear the presence of free-riders taking advantage.

Considering the behavior and norms of citizens, 73% of the sample expressed dissatisfaction, so it seems clear that they are dissatisfied with their fellow citizens, which reveals the existence of free-riders. Considering also the questions of what is a bad citizen for you, how he can be educated, and what is your opinion about the citizens who pollute the environment more, it seems clear that the interviewees have often found abusive citizens in their community because they have defined them very clearly and explained their behavior as: taking advantage of common goods; harming public goods; overusing public goods; damaging and polluting the environment; not respecting community life; breaking the rules, etc.

Thus referring to the purpose of the study, its goals will be examined through several research questions and hypotheses, as follows:

Hypothesis 1: “I am interested in exploring the effect of household income in a good citizen disposition⁷”.

Hypothesis 2: “I am interested in exploring the effect of gender in a good citizen disposition.”

Hypothesis 3: “I am interested in exploring the effect of age in a good citizen disposition.”

Hypothesis 4: “I am interested in exploring the effect of education in a good citizen disposition.”

It should be emphasized that, regarding the scale of good citizen disposition, most respondents are above-average, so almost 90.2% of the sample is at least a good citizen, referring to the scale of good citizen disposition.

Hypothesis 1

From an observation of the main statistics of the cross-tabulation of the item monthly household income and citizen scale (good citizen disposition), it is noticed that in the citizenship scale 3, those with less than ALL 100,000 account for 62.5%, in the citizenship scale 4, individuals with income levels from ALL 100,000–ALL 200,000 account for 41.0%, and those over ALL 200,000 account for 10.3%. In level 5, individuals with incomes from ALL 100,000 to ALL 200,000 represent 37.1%, and over 200,000, almost 31.4%. So when household income increases, decreases the average citizen's percent, and increases the percent of good and very good citizens, the disposition to be a better citizen increases, showing traces of Hypothesis 1, so we can claim that household income affects good citizen disposition (see Table 1).

Table 1

Table 1. Monthly household income level ^* good citizen scale cross-tabulation.

Hypothesis 2

Referring to the differences brought about by gender in the good citizen scale disposition, it is noted that according to the female gender, the disposition of scale 4 appears more, while males account more for scale 5, so it seems that gender affects the disposition to be a good or very good citizen, so there are traces of Hypothesis 2 that gender effects a good citizen disposition (see Table 2).

Table 2

Table 2. Gender ^* good citizen scale cross-tabulation.

Hypothesis 3

At the average level of the citizen scale, the age group 25–34 accounts for 62.5%; in this age group, it is likely that individuals can live near their families, and many family taxes are jointly paid by the mother and father; therefore, they appear as average citizens and more indifferent. While scale 4 is dominated by the age group 35–54, with a significant cumulative percentage within the scale of 56.4%, it is noticed that in the 35–54 age group, citizenship increases, perhaps stimulated by maturity and the stabilization of income during the life cycle. So, it seems to have traces of Hypothesis 3, pretending that age affects a good citizen's disposition (see Table 3).

Table 3

Table 3. Age group ^* good citizen scale cross-tabulation.

Hypothesis 4

Regarding the level of education, in level 3 of the citizen scale, there are citizens with secondary education up to the master's level, while in levels 4 and 5, there are more baccalaureate and master's degrees. That means that the increase in level of education increases the good citizen disposition (so we assume fewer free-riders). So referring to Hypothesis 4, it can be pretended that the level of education affects a good citizen's disposition (see Table 4).

Table 4

Table 4. Education ^* good citizen scale cross-tabulation.

Discussion

Despite the definitions and distinct peculiarities of the terms free-rider, throughout this study the free-rider disposition has been supposed to be the opposite of a good citizen. In fact, free-riders were not directly present in the sample of this study, and almost 93% of the sample appears to be good or very good citizens. This is definitely reflected by the characteristics of the majority of the sample, since they are well educated, with an average level of income, as well as having legal and economic knowledge. Regardless of the fact that the findings of this study reflect a good degree (scale) of citizenship and the absence of free-riders, this study still helped us to raise some hypotheses as well as to improve the sample in future studies in order to capture and observe better the presence of free-riders in Vlora City. Thus, the study aimed to explore not only if the citizens have knowledge about many issues but also their attitudes toward them, in order to formulate a reliable profile of the knowledge, predisposition, and attitudes localized in the sample and contribute to the formulation of local legal regulations and good civic models to have permanent and more sustainable communities and better local government planning. Let's not forget that this observation was organized immediately after the last local elections, where the perception of the local government was even clearer or more aware, but anyway, it does not reflect the perception of the quality of the new local governance.

However, other studies in the future will be conducted to determine how the distance from the center of the city affects the citizens' attitudes toward public and local services and if this makes them good citizens or free riders, as well as how the quality of local investments correlates with the disposition of free-riders and good citizens.

Data availability statement

The raw data supporting the conclusions of this article will be made available by the authors, without undue reservation.

Ethics statement

Ethical approval was not required for the study involving human participants in accordance with the local legislation and institutional requirements. Written informed consent to participate in this study was not required from the participants in accordance with the national legislation and the institutional requirements.

Author contributions

RL: Writing – original draft, Writing – review & editing. IL: Writing – review & editing, Writing – original draft. EK: Writing – review & editing, Writing – original draft. EL: Writing – review & editing, Writing – original draft.

Funding

The author(s) declare that no financial support was received for the research, authorship, and/or publication of this article.

Conflict of interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

The reviewer FM declared a shared affiliation with the author EL to the handling editor at the time of review.

Publisher's note

All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article, or claim that may be made by its manufacturer, is not guaranteed or endorsed by the publisher.

Footnotes

1. ^In addition, as of January 1, 2023, the population of Albania was estimated to be 2.761.785 inhabitants (INSTAT (Albanian Institute of Statistics), 2023a).

2. ^Despite the definitions and distinct peculiarities of the terms free-rider, throughout this study the free-rider disposition has been supposed as the opposite of a good citizen.

3. ^Questionnaire items from 12 to 18.

4. ^According to Law No. 115/2014, Date 31.7.2014 (2014), “On the Administrative-Territorial Division of the Units of Local Self-Governance in the Republic of Albania”, Vlora region has several municipalities. In this sense, Vlora municipality is one of them, with several administrative units, and exactly one of them, called the main administrative unit of Vlora municipality, is analyzed in this study.

5. ^ALL, Albania Currency Symbol (Lek).

6. ^Throughout this paper the terms “good citizen scale”, “good citizen disposition”, “citizenship scale”, “citizen scale”, “citizen disposition”, are often used interchangeably.

7. ^By the “Good citizen disposition”, we refer to their availability, attitude, perceptions, behavior, approach, etc.

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