capita spending on education, by level of education. To avoid overestimating the redistributive impact of education (and health, as per below) spending –given that the per capita spending assigned comes from national accounts data while this is not the case for other components of the fiscal system in the model–, the value of per capita spending is scaled-down.<sup>31</sup> On **health** , we allocate in-kind health benefits by identifying individuals who may be using the different types of health services and impute the (scaled down) value received from public health services.<sup>32</sup> The scaled-down value of prefecture-level per capita in-patient and out-patient health spending, obtained from fiscal data, plus a distributionally-neutral element (as the difference between the national account value and in/out-patient costs, representing the spending by beneficiary on administrative costs, recurrent spending, and health system investments) is assigned to eligible individuals in the household survey, using explicit beneficiary criteria. Beneficiaries include those contributing to health insurance, as well as categories identified as subsidized beneficiaries.<sup>33</sup> In total, 2.03 million persons in Albania are identified in the survey as beneficiaries of in-kind health benefits (out of 2.89 million in the population in the 2015 HBS). Public dental care and health care in schools are excluded in the analysis because they are seldom used by the public and not covered by the health insurance scheme. For the scaling down of public health benefits, we use the same criteria we use to scale down education benefits.

Notice that this approach to impute in-kind transfers (“production cost approach”) does not consider variance in the quality of services provided nor reflect different valuation of these services across the welfare distribution.

# **_Model performance_**

The strength of the model and its assumptions are assessed by comparing the ratio of each fiscal element’s total value to total private consumption in the survey, with the same ratio from national accounts. In other words, it is important to assess whether the relative size of the fiscal element in the economy is equal or close to the relative value of that element represented by the HBS. These checks are presented in Table A1, alongside results comparing how much of each element is captured by the survey (the share of the total amount in the survey to the revenue/transfer in the national accounts).

These checks show that across elements, and particularly the ones with larger weight in the fiscal system, the model performs relatively well. Moreover, the results are balanced between taxes and transfers, with the model capturing 64.2 percent of the value of those taxes in national accounts, and 64.8 percent of the value of included transfers.

> 31 The spending is scaled down so that the ratio of total education (and health) spending to total consumption from national accounts equals the ratio of social spending to consumption in the survey (Chapter 6, Higgins and Lustig, 2017).

> 32 We have a variable in the HBS capturing household health expenditures in the last 3 months (by public/private), but we decided not to use it to identify individuals who are actually using health services due to the short reference period.

> 33 According to the law on Compulsory Health in the Republic of Albania", compulsory health insurance contributions and payments shall be obligatory to all economically active persons with permanent residence in Albania, including employees, selfemployees, unpaid family members, and other economically active persons. Compulsory health insurance covers, also, the following categories of economically inactive persons: persons benefiting from the Social Insurance Institute, persons receiving social assistance or disability payments, in accordance with relevant legislation, persons registered as unemployed jobseekers in the National Employment Service, foreign asylum seekers in the Republic of Albania, children below the age of 18, pupils and students below the age of 25 (provided they do not have income from economic activities), and other categories defined by specific laws.

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