Confidence in formal and reliance on informal institutions – complementary or substituting relationship? – evidence from Albania

Adnan Efendic, Drini Imami and Edvin Zhllima

Post-Communist Economies, 2026, vol. 38, issue 1, 90-108

Abstract: This article explores how citizens in Albania perceive formal and informal institutions, and how these perceptions influence their confidence and reliance on these institutions, respectively. Our findings from a structural endogenous model reveal that, when formal institutions fail to inspire the expected confidence, individuals often turn to informal institutions as substitutes. Several factors shape this relationship. Firstly, when people perceive improvements in the formal institutional environment, they tend to have greater confidence in the formal and rely less on informal institutions. Secondly, when respondents believe the costs associated with formal institutions exceed their expectations, their confidence diminishes, leading to an increased reliance on informal alternatives. Thirdly, older individuals and those residing in urban areas generally exhibit lower confidence in formal and a greater dependence on informal institutions. The paper thus contributes to the discourse on formal and informal relationships. It also provides valuable insights for policy circles in Albania.

Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:taf:pocoec:v:38:y:2026:i:1:p:90-108

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DOI: 10.1080/14631377.2025.2587016

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