Efficient Delivery of Local Public Services in Ethnically Fragmented Municipalities

Macedonia started its transition from a command to a market economy after its declaration of independence in 1991 from the former Yugoslavia. In 1991, ethnic Albanians abstained from voting for the first Macedonian constitution. Soon claims of ethnic Albanians in Macedonia started to aim at proportional representation in all political institutions, more education in the Albanian language at the university level and changes to the constitution proclaiming Macedonia to be a multi-ethnic country made up, on an equal basis, of Macedonians and Albanians. In 2001, immediately after the Macedonian parliament ratified a border treaty with Serbia, ethnic Albanians clashed with Macedonian armed forces. The clashes ended with the signing of the Ohrid Framework Agreement (OFA) in 2001. Decentralization was a main preferential policy choice out of the OFA. This paper estimates the efficiency of Macedonian municipalities by using the Stochastic Frontier Analysis (SFA). We hypothesise that ethnic fragmentation may have a negative impact on the efficiency of Macedonian municipalities. We also hypothesise that political variables at municipalities in Macedonia also have impact on the municipal efficiency.