• A
  • A
  • A
  • ABC
  • ABC
  • ABC
  • А
  • А
  • А
  • А
  • А
Regular version of the site

Article

FISCAL GAMES AND PUBLIC EMPLOYMENT: A THEORY WITH EVIDENCE FROM RUSSIA

World Politics. 2002. No. 54. P. 145-183.

Why do some governments—in different countries and regions within them—employ more workers than others? Existing theories, which focus on the level of economic development, political redistribution, and social insurance may help to explain this. But they raise additional puzzles, do not fit all evidence, and fail to account for a global trend toward public employment decentralization. We propose a new theory, inspired by Russia’s recent experience, that locates one motive for subnational public employment growth in a political and fiscal game between central and subnational governments. In countries with weak legal systems, local and regional officials may deliberately set their employment levels beyond their fiscal capacity, prompting bailouts from the central government, which fears the political cost to it if wage arrears accumulate and provoke strikes. We model the logic of such brinkmanship, derive several propositions, and show that they—and the model’s assumptions—fit empirical evidence from Russia in the 1990s. Deficiencies of that country’s overstaffed, underequipped, irrregularly paid, ineffective, and strike-prone public sector appear to result in part from a system of dysfunctional incentives created by the way electoral pressures interact with the system of fiscal federalism. We suggest parallels with Latin American countries such as Argentina and Brazil.