ABSTRACT
This chapter considers whether the fiscal autonomy ensuing from decentralisation was achieved at the expense of economic and territorial cohesion. The analysis began by considering the ongoing theoretical debate regarding decentralisation's ability to moderate territorial disparities within a country. The literature, while inconclusive, suggests that decentralisation may be less able to do so in developing and low-income countries. Certain aspects of Macedonia's model of decentralisation, along with its impact on the ability of municipalities to deliver basic services an equitable manner, were then discussed. This analysis found that, while municipal boundary changes in 2004 may have achieved implicit political objectives, the process created a substantial number of small municipalities with questionable fiscal and organisational capacities. Finally, this review has demonstrated how Macedonia's system of fiscal equalisation has been unable to offset the disparities that exist between the municipalities and in some instances has actually exacerbated them.
