Cost Efficiency of Macedonian Municipalities in Service Delivery: Does Ethnic Fragmentation Matter?

Abstract

Driven by the Ohrid Framework Agreement (OFA), decentralisation in Macedonia is a policy choice for spurring national cohesion rather than an economic instrument for the more efficient delivery of services. The OFA resulted in a new Macedonian Constitution with policies related to the decentralisation process and equitable representation of communities. This paper aims first to estimate the spending efficiency of Macedonian municipalities in service delivery from their own resources and, second, to ascertain the determinants of that efficiency. The ethnic fragmentation of municipalities is taken into account as a possible determinant of efficiency, which represents a novelty in such types of studies. We employ the DEA-VRS, Kernel and SFA estimation techniques to control for the robustness of our estimates. Our findings show that on average Macedonian municipalities exhibit low efficiency in service delivery, although there are significant variations among municipalities. The ethnic fragmentation of municipalities together with the population density, own tax revenues and political affiliation of the mayor with the leading political coalition at the state level explain differences in their efficiencies. More fragmented municipalities tend to be less efficient when providing services to citizens.

Local governments' efficiency: a systematic literature review—part I

“…In addition, Lo Storto () used the number of nursery schools, Radulovic and Dragutinović () used the number of preschool institutions, Asatryan and De Witte () included “child population” measured as the ratio of the number of children at kindergartens to population, and Carosi et al. () and Nikolov and Hrovatin () considered population from 0 to 5 years old proxy the services for kindergarten. Primary and secondary education (33 papers)The main indicator used for the provision of education services in primary and secondary levels is the number of students enrolled in primary and secondary schools . Similarly, Asatryan and De Witte () used “pupil population” measured as the ratio of the number of students at secondary schools to population, while Sampaio de Sousa and Ramos (), Sampaio de Sousa et al.…”

“…Moreover, Carosi et al. () considered the school‐age population (i.e., from 3 to 13 years old), while Nikolov and Hrovatin () used population ages from 5 to 19 to proxy for primary and secondary schools.In addition, other variables have been employed to proxy for educational service provision. Pacheco et al.…”

“…In addition, Lo Storto () used the number of nursery schools, Radulovic and Dragutinović () used the number of preschool institutions, Asatryan and De Witte () included “child population” measured as the ratio of the number of children at kindergartens to population, and Carosi et al. () and Nikolov and Hrovatin () considered population from 0 to 5 years old proxy the services for kindergarten.…”

“…(), Zafra‐Gómez and Muñiz‐Pérez (), Bosch‐Roca et al. (), Štastná and Gregor (), Kutlar and Bakirci (), Nikolov and Hrovatin (), Balaguer‐Coll et al. (), Cuadrado‐Ballesteros et al.…”

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