OSIPP Discussion Paper: DP-2020-E005

Power Sharing and Patronage Ethnic Politics: The Political Economy ofEthnic Party Dominance in the Dayton Bosnia

December 14, 2020
Satoshi Tanaka*
Ph.D. student, Osaka School of International Public Policy (OSIPP), Osaka University
Research Fellow, the Japan Society for the Promotion of Science

Abstract. The effectiveness of power sharing as a solution to ethnic conflict has long
been a subject of scholarly debate. However, regardless of its supporters or critics, existingstudies focus solely on the identity-based politician–citizen linkage within ethnic groups.
In this paper, I use a patronage theory to examine the effect of power sharing on thematerial-based linkage between politicians and citizens, and I argue that power sharing has
an effect to consolidate ethnic party dominance in post-settlement politics by solidifying
the patronage system of governance. For empirical analysis, I examine the case of Bosnia
and Herzegovina. Using both qualitative and quantitative methods, I conclude that the
Dayton Constitution, which lays down typical power sharing arrangements between threeethnic groups, has provided ethnic parties with numerous job opportunities in the public
sector and that these parties could remain dominant by distributing these job opportunities
as patronage.
Keywords: power sharing, patronage politics, ethnic party*

Email: sa-tanaka@osipp.osaka-u.ac.jp

Acknowledgement: This research was supported by the Osaka University Scholarship for Overseas Research
Activities 2018, K. Matsushita Foundation Research Grant, and JSPS KAKENHI (Grant Number 20J11912).
I thank Professor Akihisa Matsuno for his guidance and comments.

1

Introduction

Power sharing is one of the most common forms of peace settlements in ethnic conflicts.
According to the consociational theory proposed by Arend Lijphart (1977), power sharing
ensures participation in the decision-making process and provides a certain level of autonomy
to all major ethnic groups, thereby promoting peace and democracy in conflict-prone societies.
Indeed, power sharing has had the immediate effect of stopping violence in many cases.
However, post-settlement politics is often destabilized by the domination of ethnic parties1 that
advocate radical nationalism, as in Bosnia and Herzegovina (hereafter, Bosnia), Kosovo, andNorthern Ireland. It may also lead to a renewed conflict, as in Rwanda.
Reflecting such realities, whether power sharing is an effective solution for ethnic conflict
has long been a subject of scholarly debate. Some argue that the introduction of power sharing
leads to a durable peace by addressing a credible commitment problem between opponents(Cohen 1997; Walter 2002; Hartzell and Hoodie 2003; Mattes and Savun 2009) andmaintaining stable democracy in ethnically divided societies (Fraenkel and Grofman 2006;
McGarry and O’Leary 2006; Norris 2008; McCulloch 2014). Others claim that adopting power
sharing arrangements or some of their forms fosters instability (Brancati 2006; Selway andTempleman 2012; Gates et al. 2016; Graham, Miller, and Strom 2017; Wilson 2020). One
classical criticism is the ethnic outbidding theory, according to which power sharing, especially
its electoral design, which divides constituencies along the ethnic lines, gives politicians an
incentive to use radical ethnonationalism to attract their followers, further solidifying ethnic
divisions (Horowitz 2000).
In this article, I point out that regardless of whether they are supportive or critical, these
existing arguments are founded on a common problematic assumption. They assume thatcitizens are actors who are always driven by ethnonational mobilization, namely that thelinkages between politicians and citizens are a given, based on ethnic identity. However, at theother end of the phenomenon, we observe that citizens wish for stable governance. Then, why
do they continue to support ethnonational politicians who cause political instability?
In contrast to the previous studies that solely focus on the institutional effects of power
sharing on the identity-based linkage between ethnonational politicians and citizens, I answer
this question by analyzing the material-based linkage between them, namely patronage.

1

Following the definition of Chandra (2004, 3–5), in this paper, an ethnic party refers to “a party that overtly
represents itself as a champion of the cause of one particular ethnic category or set of categories to the
exclusion of others, and that makes such a representation central to its strategy of mobilizing voters”.
1Ethnicity is understood as an expanded network of kinship, and therefore, inter-ethnic conflictcan be perceived as a fight to protect one’s network of kinsmen (Horowitz 2000, 78). An
important question arises here; is the network “imagined” (Anderson 1983) or more direct andmaterialistic? A patronage network refers to a personal tie between patrons who offer material
benefits and clients who provide political, economic, or military supports in exchange (Scott1972, 92). In a democratic system, patronage works by patron politicians delivering particular
benefits, such as jobs, money, land, or welfare, directly to their client citizens in exchange for
their votes in elections (Kitschelt and Wilkinson 2007). I examine the effect of power sharing
by analyzing the material-based linkage between politicians and citizens based on patronage
and clarifying how the institutional settings of power sharing have consolidated the patronage
system in the country2.
My argument can be summarized as follows: Power sharing strengthens the ethnic party
dominance by providing sources of patronage through two mechanisms. In the first mechanism,
ethnic groups are ensured access to state power and a certain level of autonomy within them,creating a large number of job opportunities in public sectors along the ethnic lines. In thesecond mechanism, ethnic groups are allowed autonomy in administration, law-making, andlaw enforcement. This “legalizes” otherwise unlawful economic activities, such as the private
distribution of public resources, within the ethnic groups. Through these mechanisms, theintroduction of power sharing provides parties that claim to represent the ethnicities withmaterial bases for their dominance.
To test the validity of the theory, I examine the case of power sharing in Bosnia. Bosnia
experienced a deadly conflict among three ethnic groups, the Bošniaks, Croats, and Serbs, from1992 to 1995. The conflict came to an end with the Dayton Peace Agreement (hereafter, DPA)
which contained typical power sharing arrangements among the three ethnic groups. While therecurrence of armed conflict has been successfully prevented for 25 years, postwar politics has
been largely dominated by ethnonational parties that played a leading role during the conflict.
Although studies on the Bosnian politics mostly focus on inter-ethnic relations (Chandler 2000;
Bose 2002; Bieber 2006; Belloni 2007), a recent opinion survey shows that people in Bosnia
do not regard inter-ethnic relations as important as other programmatic problems, such as

Recently, Ottmann (2019) and Haass and Ottmann (2020) modify the model of credible commitment
theory for power sharing by considering the actor fragmentation of rebel groups. They find that state
resources tend to be allocated to a greater extent to ethnic groups of political elites who are included in power
sharing settlements, and that power sharing promotes peace by providing resources to political elites within
the settlements to prevent rebellions from the outside. Their analyses provide a new insight into
understanding how power sharing affects the manner of material distribution. In this paper, I further analyze
the impact of power sharing on the material-based politician–citizen linkages under democratic governance.
22

corruption, economy, and politics3. If the survey holds some truth, we have to say that voters
who so eagerly vote for ethnic parties are actually not as attracted by “ethnicity” as previously
thought. Then, what attracts those voters, if not ethnic identity? I attempt to clarify this point inthis paper.
The empirical analysis in this paper consists of two parts. In the first part, I examine how
the DPA creates job opportunities along ethnic lines in the public sectors and allows the ethnic
parties otherwise unlawful control of jobs as sources of patronage. Using information obtained
from local newspapers, I analyze the historical process in which the ethnic parties came to seize
control of public resources in the postwar society. In the second part, I quantitatively analyze
how ethnic parties use the job opportunities in public companies for their patronage. Using
public company data in the Federation of Bosnia and Herzegovina, I statistically estimate towhat extent the employment situation in the public sector is affected by election results. The
findings will inform us as to what extent employments in public companies serves as a sourceof patronage.
2

Existing Debates over Power Sharing

Political scientists have long asked how democracy can work in ethnically divided societies. In
response to this question, Lijphart (1977) argues that politics can work by introducing aparticular form of democracy, consociational democracy, which requires the following four key
elements: grand coalition, proportional representation, mutual veto, and segmental autonomy.
Since the 1990s, when ethnic conflicts broke out around the world, this model has been applied
to the institutional design of several peace settlements. By guaranteeing the participation of all
ethnic groups in the decision-making process as well as a certain level of autonomy, this formof settlement, power sharing, is expected to bring an armed conflict to a halt and to ensure stableand democratic governance among opposing groups.
Some studies present theoretical and empirical evidences for the effectiveness of power
sharing in stopping armed conflict (Cohen 1997; Hartzell and Hoodie 2003; Mattes and Savun
2009; Walter 2002). In addition, the effects of stabilizing and promoting democracy in

The survey was conducted in 2013 (accessible at <http://ba.one.un.org/content/unct/bosnia_and_herzegov
ina/en/home/publications/public-opinion-poll.html>). The survey asked the question, “in your opinion, what
are the biggest problems and challenges in the country at present?” Only 10% of the respondents answeredthat “ethnic/ religious relations” were the biggest problem, while “corruption” (72.4%), “economy” (59.9%),and “politics” (50.5%) were chosen by the majority. The respondents were allowed multiple answers to thequestion. Moreover, ethnic differences were not evident in the respondents’ answers. For example, 9.1% of
the Bošniaks, 7.5% of the Croats, and 13.1% of the Serbs respondents answered “ethnic, religious relations”
are the biggest problems facing the country.
33

ethnically divided societies are supported by a certain number of studies. Norris (2008) findsthat some forms of power sharing arrangement, such as proportional representation (PR)electoral systems and federalism, are associated with a stable and stronger performance of
democracy in ethnically divided societies. Some studies argue that power sharing reduces thesalience of ethnicity by lessening ethnic differences within constituencies (Garry 2009) or byencouraging the formation of parties that advocate an axis of political issues besides ethnicity(Huber 2012). Fraenkel and Grofman (2006) claim that the PR electoral system benefits
moderate parties in elections. Through a comparison of multiple case studies, McCulloch(2014) states that power sharing serves to promote stability of democratic governance amongcontending ethnic groups in postwar societies.
In contrast, some other scholars write that power sharing often leads to unstable politics
due to the domination of ethnic parties that advocate radical nationalism, sometimes causing
the recurrence of conflict. Some find that the effect of power sharing on stabilizing ethnic
conflict depends on the degree of ethnic fractionalization (Selway and Templeman 2012;
Wilson 2020). Graham et al. (2017) argue that decentralization of political power harms
democratic survival, and as its mechanism, Brancati (2006; 2008) demonstrates that the effectof decentralization is to strengthen regional parties. Roeder and Rothchild (2005) argue thatpower sharing can entrench ethnic divisions in the country by turning all political issues into
ethnic problems, and Tilley et al. (2008) confirms this argument by analyzing the case of
Northern Ireland.
One classic criticism of the effectiveness of power sharing is the ethnic outbidding theory.
As per the theory, in ethnically divided societies, politicians have an incentive to advocate
radical ethnonationalism to gain supports within their ethnic groups (Rabushka and Shepsle1972). Under such a circumstance, dividing constituencies along ethnic lines may accelerate
this tendency, resulting in intensified ethnic polarization of party system (Horowitz 2000).
Based on this theory, a number of scholars are now trying to formulate electoral rules that
promote vote-pooling across ethnic lines (Reilly 2001; Fraenkel and Grofman 2004; Mitchell2014).
I would like to draw attention to the fact that most of these studies, regardless of whether
they are supportive or critical of power sharing, are founded on a common assumption. They
all assume that conflict is a fight between unitary ethnic groups before examining theinstitutional effect of power sharing on their behaviors. Due to this assumption, they regard thatlinkages between politicians and citizens are a given, based on identity. Theoretically, as therights of major ethnic groups are guaranteed under a power sharing scheme, it is no more4

necessary for voters to rush to radical ethnic parties. However, in practice, it is ethnonational
politicians, not moderate ones, who continue to garner more supports from citizens. Why do
citizens continue to vote for radical ethnonational politicians? Are they so vulnerable toinflammatory speeches of politicians? To understand what motivates citizens to choose radical
ethnonational politicians, the assumption may be reconsidered, and it is now necessary to assess
ethnic conflicts more closely and examine their complexities in more details.
3

A Patronage Theory for Power Sharing

By now, it is widely accepted that warring groups in ethnic conflicts are more complex and thatthey are more fragmented than unitary (Kalyvas 2003; 2008; Cunningham, Bakke, andSeymour 2012). Also, during conflicts, violence is often directed toward members of the same
ethnic group, and economic cooperation beyond ethnic lines is observed (Mueller 2000;
Andreas 2004). By simplifying the warring actors as unitary ethnic groups, the existing
approaches overlook the complexity of ethnic conflict and the effects of power sharing on it. If
ethnicity is not the driving force for thriving ethnonational parties, what is it? Here, I present a
patronage theory to explain the phenomenon.
Ethnic Conflict from the Perspective of Patronage Politics
Studies show that a patronage network may function as a governance mechanism. A patronage
network is defined as a human network whose formation is based on instrumental relationships
between a patron who offers material benefits and one or more clients who provide personal
supports to the patron in exchange. Chabal and Daloz (1999) describe that in some Africancountries, informal governance works through the distribution of public resources along
patronage networks. Such a situation may be regarded as dysfunctional by the Weberian modelof modern statehood, but governance functions with political elites allocating public resources
to their clients through the personal human networks. Kitschelt et al. (1999) also point to theimportance of the patronage network as a functional form of the communist regime.
Under the patronage systems, when public resources become scarce, conflicts may arise
among political elites over resources that they need to maintain patronage. There have been
many such cases historically, for instance in the 1980s, when the structural adjustment
programs by the International Monetary Fund and the World Bank promoted the scaling downof the public sectors. In those cases, according to Berman (1998), patronage networks tended
to be split and reorganized along ethnic lines. He describes:

5Demarcation of ethnic differences takes on political importance to the degree it is relevant inlegitimating claims to rights and resources, and in providing individuals with both meaning andorganized channels for pursuing culturally-defined interests. Ethnic identities in such contexts canbe consciously manipulated and invested in economic and political competition. Indeed, from theexternal perspective the most important aspect of the relations between ethnic groups is thecompetition and conflict over differential access to resources. (328)During war, such patronage networks can become a mechanism to mobilize soldiers (Takeuchi2009). The wars that have arisen in this way seem to have been fought between “ethnicities” at
first glance, but in reality, they can be thought of as fights between patronage networks that are
split along ethnic lines.
The patronage system is considered to be further reinforced through armed conflicts. Aninteresting process-related shift is evident from the period before the conflict to that during theconflict. Studies show that some informal forms of governance continue to function even in
conflict that are usually understood as chaotic, (Menkhaus 2006; Arjona 2014). During a
conflict, normal economy becomes impossible, and the administration in each town iscontrolled by one or more armed groups that occupy that town. Movements of ordinary citizens
are severely restricted, and the supply of basic needs to the town is also controlled by the armed
groups. Black markets are opened by the armed groups occupying the town, and they serve as
the main source for citizens to make their living. As a result, the daily life of the citizens
becomes highly dependent on the material distribution by the armed groups. This is roughly
how the patronage system of warring parties permeates into the society more deeply during a
conflict.
If ethnic wars are conflicts between patronage networks, power sharing naturally
consolidates the patronage system in post-settlement societies (Figure 1). Before the conflict,the triangular patronage network with the patron at the apex is strong and cohesive under astable political system, through the distribution of material benefits exploited from the state
apparatus (indicated by the square). During the conflict, the network is split into several
networks along ethnic lines and extended to the ordinary citizens. The power sharing scheme
allocates powers to “ethnic groups”, strengthens power bases of the ethnic parties, sustains their
dominance in post-settlement societies.

6

Figure 1. The Transformation of Patronage Networks and Power Sharing
Pre-Wartime

Post-Wartime

WartimePower Sharing and Patronage Ethnic Politics
How does power sharing transform a patronage system to survive under a postwar democraticsystem?
Distribution of public resources is one of the major tasks of politics. Governments collecttaxes from their citizens and decide where to allocate them. Studies on distributive politics
divide the manner of distribution into two categories, programmatic distribution and nonprogrammatic distribution (Stokes et al. 2013, 6-18). The distribution is programmatic when it
follows publicly open rules, whereas non-programmatic distribution is based on the privateinterests of politicians. Among several mechanisms of non-programmatic distribution,
patronage systems work when patron politicians deliver particular benefits from publicresources, such as jobs, money, land and welfare, directly to their client citizens in exchange
for their votes in elections (Kitschelt and Wilkinson 2007).
Ethnic parties are no exception in their use of patronage to collect votes. Studies report thatin multiethnic settings, more patronage tend to be allocated to ethnic groups of political elites
in power (Alesina, Baqir, and Easterly 1999). Chandra (2004) argues that in India, ethnic parties
win elections when they successfully collect votes in exchange for patronage. Under the“patronage democracy”, she writes that citizens decide which party to vote for based on theircalculations of the chance to receive benefits, which depends on the combination of theprobability of the party to win and the estimation of how many public posts they can control
when they win the election. She argues that ethnic parties are no different from other types ofparties with regard to the way they gather supports from citizens.
Under a power sharing scheme that ensures particular “ethnic groups” access to politicalpowers and state resources, ethnic parties are given a privileged status. I argue that two
mechanisms are at working here. First, under power sharing, public institutions are divided
along ethnic lines, creating a large number of job opportunities along ethnic lines in the public
7

sectors. The large volume of public sector employments is crucial for a patronage system towork. Under a patronage system, the public sector tends to grow, as more public jobs are needed
to obtain more supports (Chabal and Daloz 1999). To ensure the political participation of all
major ethnic parties, more posts are created in the public sector under power sharing. These job
opportunities, which are largely created along ethnic lines, become sources of patronage.
Second, power sharing, which provides autonomy in administration, law-making and law
enforcement to the ethnic groups, effectively “legalizes” the patronage system favoring theethnic parties. Under power sharing, in the name of “the vital interests” of the ethnic groups,
ethnic parties are free from the influence of other ethnic groups, and are able to arbitrarily apply
laws in order to maintain their control of public resources and distribute them to their client
citizens. This arrangement also allows ethnic groups to continue controlling public properties
that were informally occupied during the conflict. This is particularly true for ethnic parties thathave transformed themselves from armed groups during wartime into political parties postwar.
Through these two mechanisms, power sharing can end up strengthening the patronagebased power structure of ethnic parties.
4

The Ethnic Party Dominance in the Dayton Bosnia

To test the validity of the above model, I examine the case of Bosnia. Following the breakup of
Yugoslavia, an armed conflict broke out in Bosnia in 1992. The conflict took place between
three ethnic groups, the Bošniaks, Croats, and Serbs, each led by an ethnic party, namely the
Party of Democratic Action (Stranka Demokratske Akcije: SDA), the Croatian Democratic
Union (Hrvatska Demokratska Zajednica Bosne i Hercegovine: HDZ), and the Serb
Democratic Party (Srpska Demokratska Stranka: SDS), respectively. With a strong
international intervention, the conflict came to an end in 1995 by the signing of the DPA
containing typical power sharing arrangements between the three ethnic groups.
Although the recurrence of conflict has been successfully prevented until today, postDayton politics has been largely dominated by the above-mentioned ethnic parties. In the firstelection after the conflict in 1996, the SDA, HDZ, and SDS gained absolute supports withineach ethnic community. At one time in 2000, the government was formed by a coalition of 10
multiethnic or non-ethnic parties under a strong international initiative, but except for that year,
the governments were formed by coalitions of the ethnic parties (shown in Table 2). Since 2006,
there emerged parties competing with the existing ethnic parties in each ethnic community, but
the former also advocate ethnonationalism, sometimes even more radically than their existing8

Table 1. Presidential Elections, 1996-2018
1996
Bošniaks

Alija
Izetbegović
(SDA)

1998
Alija
Izetbegović(SDA・
Koalicija)

2002

2006

2010

2014

2018

Sulejman
Tihić
(SDA)

Haris
Silajdžić
(SBiH)

Bakir
Izetbegović
(SDA)

Bakir
Izetbegović
(SDA)

Šefik
Džaferović(SDA)

DraganŽelikoŽelikoDraganŽelikoČović
CroatsKomšić
Komšić
Čović
Komšić
(HDZ・
(SDP)
(SDP)
(HDZ)
(DF)
Koalicija)
MomčiloŽivko
Mirko
Nebojša
Nebojša
MladenMiloradSerbs
Krajšnik
RadišićŠarović Radmanović Radmanović
IvanićDodik(SDS)(SLOGA)(SDS)(SNSD)(SNSD)(PDP)(SNSD)
Notes: Gray boxes indicate candidates from ethnonational parties, and white boxes indicate candidates frommultiethnic, non-ethnic or moderate/ pro-Dayton ethnic parties. Parties of the candidates are listed in parenthesis
after their names.
Krešimir
Zubak
(HDZ)

Ante
Jelavić(HDZ)

Table 2. Council of Ministers, 1996-2018
1996
SDA
HDZ
SDS

1998
Koalicija
HDZ
SLOGA

2000
Alliance
for Change
(SDP,
SBiH,
+ 8 others)

2002
SDA
HDZ
PDP
SDS
SBiH

2006
SNSD
HDZ
SDA
SBiH
HDZ1990

2010
HDZ
SDP
SNSD
SDA
SDS
HDZ1990+ 1 other

2014
SDA
HDZ
SDS
DF
+ 2 others

2018
SNSD
HDZ
SDA
+ 6 others

Notes: Gray boxes indicate ethnonational parties, and white boxes indicate multiethnic, non-ethnic or moderate/
pro-Dayton ethnic parties. A party that only holds one minister post is listed as “other”.

Table 3. The Bosnian Party System
Wartime Ethnic Parties
Challenger Ethnic Parties

Bošniaks

Croats

Serbs

SDA

HDZ

SDS

SBiH

HDZ1990

SNSD

Multiethnic/
Non-Ethnic Parties

SDP, DF

Source: (Hulsey 2010)
Notes: I only list up parties that gain a certain level of supports at the national level for multiethnic/ non-ethnic
parties.

9

counterparts4. Only two multiethnic parties so far, the Social Democratic Party (SDP) and the
Democratic Front (DF), have competed with the ethnic parties. Other multiethnic or non-ethnic
parties are usually smaller and have geographically limited constituencies. Why do the ethnic
parties dominate the post-Dayton Bosnian politics?
Existing studies perceive the rivalry mostly as an ethnic issue (Chandler 2000; Bose 2002;
Bieber 2006; Belloni 2007) and analyze how the electoral settings affect the ethnic party voting(Caspersen 2004; Manning 2004; Hulsey 2010) 5 . However, the results of a recent opinion
survey from 2013 casts doubts on the importance allocated to ethnic issues by voters (seefootnote 3). If the majority of citizens do not support ethnonationalism, why do the ethnic
parties continue to gather votes from citizens in elections? It follows that factors other thanethnic mobilization must be at play here. In the following sections, I explain this puzzle using
the concept of patronage.
5

Patronage and Ethnic Politics under the Dayton Constitution

The Origin of Patronage Ethnic Politics in Bosnia
Before moving on to the analysis on power sharing in postwar Bosnia, I first highlight thesalient points of the patronage system in Bosnian ethnic politics. While it is widely recognizedthat the conflict in Bosnia was caused by the ancient hatred among the ethnic communities, itis worth remembering that those communities have also coexisted peacefully for most of thehistory (Malcolm 1996). Moreover, during the conflict the ethnic political elites reportedly
behaved opportunistically and sought to establish a governance structure through material
distribution to the citizens.
In 1990, the first free elections were held in Yugoslavia, a socialist country. In the election
in Bosnia, three ethnic parties, the SDA, HDZ, and SDS, replaced the socialist regime in power.
Thereafter, the parties began to compete with each other over the political posts at both thenational and the local levels. Anti-war protests among the citizens spread rapidly across the

The parties are the Party for Bosnia and Herzegovina (Stranka za Bosnu i Herzegovinu: SBiH), theCroatian Democratic Union 1990 (Hrvatska Demokratska Zajednica 1990: HDZ 1990), and the Alliance ofIndependent Social Democrats (Savez Nezavisnih Socijaldemokrata: SNSD), which serve the Bošniak, Croat
and Serb communities, respectively. Although SBiH and SNSD were initially regarded as moderate parties
by the international community, once they assumed power in 2006, they turned into radical nationalists.
SBiH, as a party representing the majority ethnic group, the Bošniaks, claims the abolishment of the entities.
SNSD leads the demand for the secessionism of the Serbs from the Dayton Bosnia.
5
Some studies point out the importance to look at corruption, state capture and clientelism to analyze thecurrent Bosnian political situation (Belloni and Strazzari 2014; Hulsey 2018; Piacentini 2019). In this paper,
I further investigate the mechanism by which the power sharing arrangements have resulted in the ethnic
party dominance through the consolidation of patronage politics.
4

10

country from 1991. However, when tensions heightened, skirmishes in various local towns
escalated into a war in 1992 (Kaldor 2012, 45).
Taking advantage of the war situation, ethnic party leaders sought to seize control of theeconomy by force in the towns they occupied. A typical method of control was smuggling.
During the war, an HDZ political leaders, Jadoranko Prlić, in cooperation with Neven Tomić,
the Minister of Finance of the military faction of HDZ, arbitrarily imposed tariffs on goods
transported across the border between Bosnia and Croatia. He selected some particularcompanies and some of their products, such as liquor, petroleum, agricultural products, andfoods, and exempted them from imported duties. For example, Primorka, a tobacco company
in Siroki Brijeg, was exempted from import duties, and eventually grew to capture over 80%of the market share in Bosnia6. Thus, the HDZ became the ruler of the monopolistic economy
in Bosnia.
The ethnic party leaders also succeeded in establishing a governance structure through thematerial distribution to the citizens during the war. For example, Bošniak residents in the cityof Sarajevo, which was under siege by the Serb army, were targeted by snipers from themountains. This condition was beneficial not only for the surrounding Serb political elites, whoearned profits by demanding a quarter of the aids delivered to the city by the UN as “tariff”,
but also for the Bošniak political elites, who controlled the supply of the goods to the city andsold them at a high prices in the black market (Andreas 2008, 43). Under the siege, materials
were delivered from outside the city through a tunnel dug under the airport in 1993. More than
4,000 people and 20 tons of materials were channeled per day through the tunnel, and the SDA
client gangs were in charge of the operation (Andreas 2004, 39). During the war, the lives of
the citizens were highly controlled by the occupying groups. Checkpoints were set up on thestreets, and the movements of the citizens were highly controlled regardless of their ethnicity7.
Considering the hardships faced in obtaining basic necessities through the normal economy,
the black markets became an essential source of items required for daily living by ordinary
citizens. As a result, their lives became highly depended on the occupying ethnic parties.
The Public Sector under the Dayton Constitution
The DPA consists of six articles and 11 annexes, of which Annex 4 became the postwar
Bosnian constitution. The Dayton Constitution defines three ethnic groups, the Bošniaks,

6“Primorka je godišnje uvozila u BiH bez carine 2500 tona cigareta iz Rovinja i Potom ih prodavala i u
Hrvatskoj“, Slobodna Dalmacija 22 September 2001.
7
ICTY: IT-04-74-T D2165-1567/78692BIS para. 115-118.
11

Croats, and Serbs, as the “constituent peoples”, and introduces a number of power sharing
arrangements between them. First, the territory is divided into two entities, with 51% reserved
for the Bošniaks and Croats as the Federation of Bosnia and Herzegovina (FBiH). The rest(49%) is allocated to the Serbs as Republika Srpska (RS). FBiH is further divided into ten
cantons. The Bošniaks and Croats make up the majority in five and three of them, respectively,
while the remaining two are mixed cantons. Second, based on the proportional principle,
political posts are allocated equally to all three ethnic groups. For example, the Presidency, thehighest authority of the country, consists of three members, one from each ethnic community.
The positions of the ministers and the seats of the parliaments are also distributed equally
among all three ethnic communities.
Under the Dayton Constitution, the state is responsible only for certain areas such as foreign
policy, customs policy and monetary policy. The entities hold the remainder of the
responsibilities, including law-making, law enforcement, and taxation 8 . In the FBiH, theresponsibilities are further decentralized, and they are mostly allocated to the canton level.
Thus, we can say that Bosnian politics is composed of 12 relatively independent polities,
including 10 cantons in the FBiH and one entity of the RS in addition to the Brčko special
district. This is a multilayered governance system. The 3.5 million people of Bosnia aregoverned by one government at the state level, two at the entity level, one in the Brčko district,ten at the canton level in the FBiH, and there are 79 and 64 government entities in the FBiH
and the RS at the municipality level, respectively. Each government at the state, entity andcanton levels has its own ministries.
Under the Dayton Constitution, public institutions are typically divided along the ethniclines, regardless of the ethnic composition of the administrative area. For example, Drvar, atown in the northwestern Bosnia, was divided into two, Drvar and East Drvar, under the Dayton
Constitution. Now, the former, with a population of 7,036, belongs to the FBiH, and the latter,home to only 79 people, belongs to the RS. This division necessitated the need for a separate
town office with a certain number of staff for the 79 residents of East Drvar. Another example
of such a division is the policy of “One Roof, Two Schools”. Under this policy, each school in
multiethnic towns is divided into two “schools” within the same school building. Each “school”
employs a principal, teachers, and administration staffs. As these examples illustrate, theDayton Constitution has effectively doubled the job opportunities in the public sector.

Since 2006, the state authority has been able to collect tax directly as the value added tax. However, until
then, the budget of the state institution was totally dependent on contributions from the entities.
12

8

The Domination of the Public Sector by Ethnic Parties
The Dayton Constitution has not only increased jobs in the public sector along ethnic lines, but
has also enabled the ethnic parties to control them. The Dayton Constitution allows thegovernments at the entity level in the RS and at the canton level in the FBiH to exercise powerover most areas of public policies, including law-making, law enforcement, and taxation. This
constitutional arrangement has created opportunities for collusion among the executive, thelaw enforcement, and judicial arms, thus allowing the ethnic parties to “legalize” otherwise
unlawful economic activities.
Under the Dayton Constitution, the police is administrated by the Ministry of Interior of
the entity if they are in the RS, and of the canton if they are in the FBiH, and their budgets arealso provided by those governments. The same applies to the courts. In the FBiH, judges ofcanton courts are appointed by the mayor of their own cantons, and who then appoint judges
of municipal courts in their canton. Thus, this institutional design allows ruling parties in the
RS and FBiH governments to wield a strong influence on the operations of the police and courtsin their respective territories.
As a result, the ethnic parties have continued to control the economy even after the end of
the war. Prlić, and the HDZ officials continued to make profits by smuggling (Pugh 2002, 479,
note 25). Radovan Karadžić, the leader of the SDS, is also suspected of having engaged insmuggling activities at the border to Serbia. Festić and Rausche (2004, 27-34) claim that since
the RS government was authorized to control the border with Serbia, customs officers were, inmost cases, recruited from among those connected with the SDS party leaders. This allowed
the party to control the border to favor their smuggling activities. Another example involves
the HDZ party elites embezzling the financial assistance received from Croatia. One of the
HDZ party leaders, Ante Jelavić, who was involved in the smuggling activities with Prlić
during the war, became a broker for the financial aids given to the FBiH by the Republic of
Croatia. After the conflict, Croatia provided financial assistance to the FBiH under the guiseof a “defense budget”. Using an account in the Herzegovina Bank, which was controlled by
the HDZ, Jelavić embezzled the aids and distributed the money to the HDZ officials in Bosnia9.
Public companies are subjected the most to economic domination by the ethnic parties.
Privatization of public companies that were socially owned in the former Yugoslavia became
one of the biggest agendas in the postwar international state-building project. However, theethnic parties attempted to obstruct the process and tried to retain control to the extent possible.

9

Case No: KPV-10/04, the Court of Bosnia and Herzegovina, 4 November, 2005.
13

In the former Yugoslavia, electricity, energy, and telecommunications were among themost profitable industries, and many large companies, such as JP Elektroprivreda,
Energoinvest, Energopetrol, and PTT, existed. The Bošniak ethnic party, the SDA, wrested
control of those companies in the postwar period by distributing the directors’ posts to thoseloyal to Edhem Bičakčić, the prime minister of the FBiH government from 1996 to 2001 andconcurrently the director of Elektroprivreda 10 . In 2001, PTT was divided into several
companies, such as BH Telecom and BH Pošta, under the Alliance for Change government thatwas established under the strong international initiative. However, when the SDA returned to
power in the 2002 election, the directors of these companies were replaced by the SDA loyalists
who had connections with the SDA officials or their family members11. The Croat ethnic party,
the HDZ, also seized control of the management of the Croat part of the companies. The
privatization process of these major public companies, the so-called “the List 47”, was greatly
delayed by the ethnic parties, the SDA and HDZ, in the FBiH12. In fact, the privatization was
only possible as the privatization laws were enacted differently in each entity. For example, theprivatization law in the RS denied the Bošniaks and Croats the right to participate in the process,and only the Serbs could join13.
This “ethnic privatization” enabled the ethnic parties to manipulate the privatization
process and to retain control of these companies. It is reported that Elektroprivreda, whoseboard members are predominantly SDA officials, entered into fictitious contracts with six
private companies for a project that did not actually exist. By making that fictitious payment
in stocks, the SDA officials tried to retain the stocks of the company among the party members14.
This “intra-party privatization” was observed in the case of HPT, too, which was under the
influence of the HDZ15. Another example is Mostar Aluminum, one of the largest companies
in the former Yugoslavia. During the conflict, it was under the control of the HDZ, with Mijo
Brajković as the company chief. In the privatization process, Brajković manipulated the selling
price of the company to an incredibly low level in order to distribute the stocks among theemployees of the company. Mostar Aluminum was valued at $6,200 million before the conflict,“Državna preduzeća sa “SPISKA 47” neće biti privatizirana nego ostaju pod kontrolom stranačkih
oligarhija,” Slobodna Bosna, 3 February, 2000.
11“Mjesečna plaća direktora ‘BH Telecoma’ 8,5 hiljada maraka!!!,” Slobodna Bosna 26 August, 2004.
12“Državna preduzeća sa “SPISKA 47” neće biti privatizirana nego ostaju pod kontrolom stranačkih
oligarhija,” op.cit.
13“Alija, odluči se!! Dani 30 March, 1998.
14“Meho Obradović, bivši direktor Elektroprivrede, potpisao šest fiktivnih ugovora: umjesto novecem,'radovi' isplaćivani u dipnicama!!!,“ Slobodna Bosna, 28 February 2002.
15
Ibid.
14
10

but it was sold at $84 million despite suffering little damages during the conflict. After the war,
the company produced a profit of $85 million in the first year. Thus, the HDZ retained controlof the company (Pugh 2002, 475).
To sum up, the power sharing scheme introduced by the DPA created a huge public sector
in postwar Bosnia, and by granting autonomy to the ethnic groups, it “legalized” thedomination of the economy, especially the public companies, by the ethnic parties that had led
the conflict.
6

The Political Economy of Ethnic Party Dominance

As presented above, power sharing provided the ethnic parties with sources of patronage in
Bosnia. By making use of the job opportunities in the public sector as patronage, they continue
to dominate postwar politics.
For example, employment opportunities as public servants were distributed among ethnic
party members. In Herzegovina Neretva Canton, it was found that all of the 510 public servants
working for the government in 1999 were employed through connections with the party
officials, and none of them had appeared for any of the required examinations, which is against
the law (International Crisis Group 1999). The social security program was another avenue forthe distribution of material benefits to party loyalists. Bičakčić, an SDA party leader, had added
money to the budget for the employment assistance programs for veterans and people with adiability. Then, it is reported that applying them to party supporters who would not otherwise
be eligible, he created and distributed job opportunities among those loyalists16. Further, bycontrolling the management of public companies, the ethnic parties also continue to exert theirinfluence over private companies that work as their subcontractors. For seven years, from 1995
to 2002, 90% of the public procurement contracts of PTT were signed with the same 20
companies17. Those companies were in fact headed by directors who were the SDA officials or
their family members. Through distributing public funds to the private companies throughprocurement, the SDA officials tried to exert party’s influence over the private sector as well.

“Bičakčić je ilegalno formirao federalni zavod za zapošljavanje dijeleći iz fonda desetine miliona maraka
pozajmica i kredita!,“Slobodna Bosna, 23 November, 2000.
17“Profit PTT BiH od 500 miliona maraka uglavnom je investiran u dalji razvoj kompanije: poslove jedebijala vrhuška SDA i njihova najuža rodbina!,“ Slobodna Bosna, 1 August, 2002.
15
16

The Ethnic Party Dominance and Jobs Distribution in the Public Sector
In addition to the anecdotal evidences mentioned above, I quantitatively estimate to what extent
the ethnic parties use the distribution of job opportunities in the public sector as a means ofcollecting votes in elections. In particular, I focus on the job opportunities in public companies.
In Bosnia, approximately 80,000 people are employed in 550 public companies, accounting for
40% of all fixed assets in the economy (Parodi and Cegar 2019, 6). While the number of
employees is not decisively large enough to determine an election’s result, this sector occupies
an important position in the Bosnian economy, given its influence on the private sector, forexample, through public procurement. Further, with the unemployment rate hovering at 20%,
especially among approximately 50% of the youth, job opportunities in the public sector arebound to attract the citizens18. Therefore, in order to explore a material base of the ethnic party
dominance, here I investigate to what extent job opportunities in public companies are used as
patronage.
To examine this question, I estimate how much job opportunities in public companies
increase under ethnic party government. As discussed in the previous section, the Dayton
Constitution has created job opportunities in the public sector along ethnic lines and provided
the ethnic parties with privilege status to control and distribute them to their supporters. Thissituation is considered to make ethnic parties much easier to arbitrarily create job opportunities
in the public sector, compared to multiethnic or non-ethnic parties. Assuming the increased job
opportunities are all distributed to party supporters, here I analyze how much job opportunities
in public companies are used as patronage. In reality, the parties are considered to distributejob opportunities not only by increasing the number of employees, but also by replacing theemployees with their party loyalists. However, due to data limitation regarding the replacementof employees, I only examine changes in the number of employees in this analysis.
A. Data
Data on the employees of the public companies are obtained from the Financial Intelligence
Agency of the Federation of Bosnia and Herzegovina (FIA) and Akta.ba. Specifically, I use thedata on public companies at the municipality level. FIA publishes the list of all publiccompanies in the FBiH, and Akta.ba possesses data on the number of employees of thecompanies from 2010 to 2018 at the time of writing. With using the two data sources, I constructa panel dataset of public companies at the municipality level.

The unemployment rate follows the ILO standard <https://www.ilo.org/shinyapps/bulkexplorer11/?lang=en&segment=indicator&id=SDG_0852_SEX_AGE_RT_A >1618

Data on the electoral outcomes are from the Central Election Commission of Bosnia andHerzegovina. In Bosnia, municipal elections are held every four years, and cantonal electionsin the FBiH are held two years after municipal elections. For the period under study, Bosnia
held two times of municipal elections in 2012 and 2016, and three times of cantonal electionsin 2010, 2014, and 2018. I combine the results of the 2008, 2012, and 2016 municipal elections
and the 2010 and 2014 cantonal elections with the panel dataset. As elections in Bosnia usuallytake place in autumn, and government formation begins next year, I do not include the electoral
results of the 2018 cantonal election.
B. Identification Strategy
In the analysis, I compare the number of employees in public companies located inmunicipalities where an ethnic party is in power with those located in municipalities where amultiethnic or non-ethnic party is in power. I first assume that the number of employees in a
public company is determined by the following model:
𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑒!"# = 𝛼! + 𝛽𝐷1"# + 𝛿𝑇𝑅𝐸𝑁𝐷# + 𝜀!"#(1)

The dependent variable 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑒!"# indicates the number of employees in company i locatedin municipality m in year t. 𝐷1"# is a dummy variable that takes 1 when municipality m inyear t has a mayor from an ethnic party and takes 0 when a mayor is from a multiethnic or nonethnic party. 𝑇𝑅𝐸𝑁𝐷# represents a yearly trend across all companies in year t. 𝜀!"# is the error
term. Here, company fixed effects 𝛼! are controlled for so that the coefficient 𝛽 captures theaverage difference in the number of employees between under ethnic party government andnon-ethnic party government within each company.
Additionally, since the budgets of municipalities depend on the canton they are located in,the municipality and the canton must be ruled by the same party in order for a company toincrease job opportunities as rewards for electoral supports. Thus, I interact an additionaldummy variable, 𝐷2"# , that takes 1 when the same party holds power both in municipality mand the canton where it is located, and 0 otherwise, with the explanatory variable as follows:
𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑒!"# = 𝛼! + 𝛽𝐷1"# × 𝐷2"# + 𝛿𝑇𝑅𝐸𝑁𝐷# + 𝜀!"#

17

(2)

Furthermore, I take the first difference of the above model in order to capture how changes
in the party in power on changes in the number of employees of public companies in themunicipality. When ∆ denotes a first difference, the model can be written as follows:∆𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑒!"# = 𝛽Δ𝐷1"# × Δ𝐷2"# + 𝛿Δ𝑇𝑅𝐸𝑁𝐷# + Δ𝜀!"#(3)

In the literature on distribute politics, there is debate about when those rewards for electoral
supports are allocated associated with the electoral cycle (Golden and Min 2013, 83-84). Thus,
I additionally analyze the effects of the formation of ethnic party governments on changes in
the number of employees in public companies separately for each year since elections.
C. Results
Table 4 presents the results of the ordinary least squares (OLS) regression on the average
difference in the number of employees in public company between under ethnic party
government and non-ethnic party government19. Column (1) shows the result of the estimationof the model (1), and Column (2) reports the estimation result with interacting the dummy
variable of whether the municipality has the same party government with the canton where it islocated, with the explanatory variable (the model (2)). As the coefficients of those results show
positive numbers, the number of public company employees might be slightly larger inmunicipalities with ethnic party government than those with non-ethnic party government, but
the results are not statistically significant.
I next analyze the effect of ethnic party government formation on changes of the number ofpublic company employees by taking the first difference. The results are presented in the Table
5. Column (1) shows the estimation results without, and the results in column (2) are with theinteraction with the same party government with the canton dummy. The results in column (2)indicate that the victory of an ethnic party in an election increases the number of employees inpublic companies in the municipality, when the municipality has the same party government
with the canton. The scale of the increase in the number of public company employees isapproximately 10%, but the significance level of the results is not so high (p < .10).
I further analyze the effects of ethnic party government formation separately for each year
since elections. The results are shown in the Table 6. The numbers 1 through 4 point to that thecolumns below them report the estimated results of the effects of the formation of ethnic party

19

Since there is a large variance in the number of employees, I take their natural logarithm.
18

Table 4. Ethnic Party Government and Public Employment
Outcome: ln(employee)

(1)

(2)

Ethnic Party Government

0.057(0.049)0.052(0.059)Same Party Government with Canton-0.034(0.043)Ethnic Party Government
× Same Party Government with Canton

0.033(0.059)Company fixed effects

YES

YES

Year fixed effects

YES

YES

Observations

1631

1631

*p < .10**p < .05***p < .01

Notes: Robust standard errors are adjusted for clusters by company in parentheses. For ethnic
parties, I include SDA, A-SDA, SDA-S, SBiH, SBB, HDZ, HDZ1990, HSP SNSD, and for
non-ethnic parties and SDP, SDU, Naša Stranka, Ns-RzB, DNZ, GS, HSS, Laburisti, andindepenent candidates.

Table 5. Ethnic Party Government and Public Employment (First-Difference)
Outcome: ln(Δemployee)

(1)

(2)

Ethnic Party Government

0.017(0.038)-0.047**(0.019)Non-Ethnic Party Government

0.011(0.027)0.022(0.030)Same Party Government with Canton-0.003(0.016)Ethnic Party Government
× Same Party Government with Canton

0.111*(0.063)

Non-Ethnic Party Government
× Same Party Government with Canton-0.084(0.054)

Election-year fixed effects

YES

YES

Observations

1244

1244

*p < .10**p < .05***p < .01

Notes: Robust standard errors are adjusted for clusters by company in parentheses.

19

20
358

Observations

Notes: Robust standard errors are adjusted for clusters by company in parentheses.

*p < .10**p < .05***p < .01

YES
358

YES

-0.547***(0.243)

Non-Ethnic Party Government
× Same Party Government with Canton

Election-year fixed effects-0.111(0.116)Ethnic Party Government
× Same Party Government with Canton

0.023(0.061)-0.002(0.036)(2)

0.114(0.094)-0.031(0.063)

Non-Ethnic Party Government

1

Same Party Government with Canton-0.003(0.043)(1)

Ethnic Party Government

Year after Elections

Outcome: ln(Δemployee)

352

YES

0.057
(0.036)-0.008(0.035)

(3)

2

352

YES

0.139
(0.104)0.322***(0.104)-0.147*(0.084)0.053(0.039)-0.124**(0.060)

(4)

173

YES

-0.003(0.035)-0.024(0.057)

(5)

3

173

YES

-0.089(0.059)0.107(0.100)0.051(0.036)0.010(0.043)-0.090(0.082)

(6)

166

YES

-0.058(0.040)-0.012(0.037)(7)

Table 6. Ethnic Party Government and Public Employment (First-Difference: Years since Elections)
4

166

YES

-0.060(0.081)

0.012(0.082)0.048(0.050)-0.052(0.053)-0.037(0.045)(8)

government on the change in the number of public company employees from elections to that
numbers of years later. Column (1), (3), (5), and (7) report the results without, and column (2),(4), (6), and (8) present the results with the interaction with the same party government with the
canton dummy. The results indicate that the number of public company employees increases
two years after an election taken place, when the municipality has the same party government
with the canton as shown in column (4). In addition, the result shows that when a non-ethnic
party wins an election, the number of public company employees largely decreases in the next
year of election if the municipality and the canton have the same party government. Although
it is not statistically significant, the results also show the number of employees decreases in thenext year of election when an ethnic party wins the election and the municipality has the same
party government with the canton. Based on the results from Table 5 and Table 6, it can bepredicted that both when an ethnic party and a non-ethnic party win an election, the number ofpublic company employees decreases, and they are replaced by party supporters at first.
However, when an ethnic party wins an election, the number of employees is later increased,
and more people are employed in public companies in the municipality compared to when anon-ethnic party wins. This indicates an ethnic party has a privilege status to make use of theemployment opportunities in the public sector as a means of collecting supports from citizens.
7

Conclusion

The effectiveness of power sharing as a means of ethnic conflict resolution has long been atarget of scholarly debate. However, regardless of whether the debaters are supportive or critical,
previous studies are founded on a common problematic assumption; they mostly regard ethnic
conflict as a fight between unitary ethnic groups and assume that the linkage between politicians
and citizens within an ethnic group is a given, based on ethnic identity.
In contrast, in this paper, I point out the complexity of ethnic conflict and present a novel
theory to capture the effect of power sharing on the patronage system of ethnic politics.
Illustrating the transformation of a patronage network from pre-war to during the war andpostwar, I argued that the introduction of power sharing arrangements allocating particularethnic groups power consolidates the patronage system of governance in a post-settlement
society and strengthens ethnic party dominance.
To test the validity of this model, I examined the case of Bosnia. First, I analyzed how the
Dayton Constitution, which contains the typical power sharing arrangements between threeethnic groups, created numerous job opportunities in the public sector along ethnic lines. By
allowing the ethnic groups autonomy in law-making, law enforcement, and taxation, the power
21

sharing arrangements “legalized” otherwise unlawful domination of the economy by the ethnic
parties. Later, I quantitatively examined how many jobs in the public sector are in fact the resultof patronage by the ethnic parties. The result of the analysis shows that when an ethnic party
wins in municipal elections in a canton it already exercises power over, job opportunities in the
public companies increase. This analysis thus proves that the ethnic parties made use of public
employment as rewards for election supports.
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