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XML schema design has two opposing goals: elimination of update anomalies requires that the schema be as normalized as possible; yet higher query performance and simpler query expression are often obtained through the use of schemas that permit redundancy. In this paper, we show that the recently proposed MCT data model, which extends XML by adding colors, can be used to address this dichotomy effectively. Specifically, we formalize the intuition of anomaly avoidance in MCT using notions of node normal and edge normal forms, and the goal of efficient query processing using notions of association recoverability and direct recoverability. We develop algorithms for transforming design specifications given as ER diagrams into MCT schemas that are in a node or edge normal form and satisfy association or direct recoverability. Experimental results using a wide variety of ER diagrams validate the benefits of our design methodology.