Interethnic Income Inequality in the Republic of Macedonia: A Note on Factors Underlying Civil War in 2001

Abstract

In early 2001, civil war occurred in the Republic of Macedonia. The armed conflict between the government and Albanian rebel organization lasted over half a year. Although it was not a direct cause of the conflict, interethnic income inequality is considered to have contributed to escalating grievances of ethnic minorities in Macedonian society. In fact, it has been widely recognized that economic inequality between groups divided ethnically or geographically in society is one of possible causes of civil war.

The purpose of this paper is to investigate the scale and determinants of interethnic income inequality in Macedonia using a set of municipality-level data during the period 1986-95. This investigation relies on two quantitative methods: the decomposition of inequality measures (Theil index and the variance of logarithms) and the regression analysis. In these analyses, per capita social product, a proxy for per capita income is used as an indicator of the municipal income level.

The decomposition of inequality measures by groups reveals that marked income inequality had persisted between two groups: ethnic Macedonian-dominant and ethnic minority-dominant regions. Furthermore, the decomposition by factor components illustrates that interethnic income inequality is attributed to interethnic dispraises in capital stock per capita and the proportion of working population.

The regression analysis shows that the income level depends greatly on the proportion of working population and education level, both of which are significantly correlated with ethnic structure. On the other hand, the regression analysis finds no significant effect of ethnicity on capital stock per capita and labour productivity, with all other conditions controlled. These results suggest that in Macedonia, interethnic income inequality is associated with interethnic disparities in social and religious factors that are reflected in demographic structure, labour market structure and education.