Lex localis - Journal of Local Self-Government_11(1)_January

L EX LOCALIS - J OURNAL OF L OCAL S ELF -G OVERNMENT Vol. 16, No. 4, pp. 715 - 734, October 2018 Municipal Efficiency and Economies of Scale in Bosnia and Herzegovina A IDA S OKO & J ELENA Z ORIČ 1 Abstract This study estimates municipal efficiency and economies of scale of municipalities in Bosnia and Herzegovina by employing data envelopment analysis (DEA) with variable (VRS) and constant (CRS) returns to scale. The results indicate low overall municipal efficiency, with economies of scale reached in very few municipalities. The average municipal efficiency score is 0.7115 under DEA VRS assumption, where only 16% of municipalities are found efficient. The average scale efficiency is 0.7458 with full scale efficiency reached by only 11% of municipalities in Bosnia and Herzegovina. Furthermore, the analysis shows strong positive impact of number of inhabitants on overall municipal efficiency. Politically motivated fragmentation of municipalities, aiming to bring peace and stability to the country, did not go hand in hand with improved economic efficiency. Keywords: • municipal efficiency • economies of scale • data envelopment analysis • Bosnia and Herzegovina C ORRESPONDENCE A DDRESS : Aida Soko, Ph.D. Student, University of Sarajevo, Faculty of Economics, Husrefa Redžića 11, 71000 SarajevoBosnia and Herzegovina, email: aida.soko@gmx.com. Jelena Zorič, Ph.D., Associate Professor, University of Ljubljana, Faculty of Economics, Kardeljeva pl. 17, 1000 Ljubljana,Slovenia, email: jelena.zoric@ef.uni-lj.si . https://doi.org/10.4335/16.4.715-734 (2018) ISSN 1581-5374 Print/1855-363X Online © 2018 Lex localis Available online at http://journal.lex-localis.press .