In this research spotlight, a study by Bilyana Petrova shows how corruption and inefficiency obstruct the supply side of redistribution.
How does a country’s quality of government affect its adoption and implementation of policies aimed at reducing inequality? Many countries struggle with monitoring their bureaucracy, ensuring the proper use of their resources, and enforcing the rule of law. Studies have shown that such problems can have a negative impact on economic growth and development, foreign investment, and public participation. Yet few have examined how a nation’s quality of government can hinder its ability to allocate funds to redistribution and deliver those funds to their beneficiaries — a primary means of lowering economic inequality.
A new study by Bilyana Petrova, “Redistribution and the Quality of Government: Evidence from Central and Eastern Europe,” recently published in the British Journal of Political Science, shows that higher levels of corruption, rampant bureaucratic inefficiency, and ineffective enforcement of the rule of law are associated with lower levels of redistribution. Contrary to demand-oriented perspectives, which blame lower redistribution on the lack of public support for the welfare state, Petrova examines the capacity of states to adopt and implement inequality-reducing policies.
Her study focuses on Central and Eastern Europe, which exhibit higher aggregate levels of support for state-sponsored redistribution, in part because of the historical legacy of socialism, Petrova writes. She tested her argument with cross-sectional time-series analyses of 21 Central and Eastern European countries from 1996 to 2013. The paper is the first systematic quantitative study to examine the determinants of economic redistribution in this region.
The study shows that a county’s quality of government — defined in terms of the corruptness of the state apparatus, the enforcement of the rule of law, and the efficiency of the civil service — powerfully shapes the supply of economic redistribution. Poor government can decrease the real amount of spending on social benefits for the poor if bureaucrats expropriate funds from the system. The same effect occurs when public officials are not competent enough to reach citizens who are eligible for benefits. “In the absence of a legal system that punishes offenses, malpractices persist,” she writes. “The state therefore fails to effectively alleviate income inequality.”
Petrova cites examples in Bulgaria, where a former senior accountant with political connections was found guilty of expropriating 390,102 BGN ($222,559) allocated to social benefits for low-income citizens yet received an unusually short prison sentence, and in Romania, where two towns suspended social benefits payments for three months after an investigation uncovered pervasive fraud.
Although the scope of the study is limited to the post-communist world, Petrova’s findings are broadly applicable to states beset by rampant corruption, lower bureaucratic quality, and ineffective enforcement of the rule of law — problems that affect many developing countries in Asia, Africa, and Latin America. “This work can thus shed light on dynamics related to economic redistribution in a wide range of settings,” she writes in her conclusion.