Dealing with corruption on small local government it is complex matter. Countries that have remained for long periods in transition process tend to be more exposed and vulnerable to corruption. This research paper deals with form of corruption and the consequences of corruption on local economic development. Local governments need effectively and efficiently to use financial, human and natural resources to increase rate of local economic development. As a most know types of corruption found on local government are types such as bribery, extortion, embezzlement, nepotism, and patronage system. The focus of this paper will be the Municipalities in Republic of Macedonia. Authors suggests that whilst it is difficult to ascertain the exact impact and consequences of corruption on local development, we should be aware that in the absence of corruption greater and more sustained levels of local development can be achieved. The authors will perform a quantitative and qualitative research using questionnaire as a method for gathering information and data from citizens to get their opinion toward corruption on their municipality, evaluate their trust towards official people that are responsible for minimizing corruption on their municipalities and to analyze consequences of corruption on local economic development.