Organizational Design of Welfare

Central European University Department of Political Science ORGANIZATIONAL DESIGN OF WELFARE-ENHANCING PUBLIC BUREAUCRACY: A Comparative Analysis of Russia’s Regions by Marina Nistotskaya Thesis submitted in partial fulfillment of the requirements for the Degree of Doctor of Philosophy Supervisor: Tamás Meszerics Committee: Gary J. Miller, Washington University in St. Louis (USA) Jan-Hinrik Meyer-Sahling, University of Nottingham (UK) CEU eTD Collection Levente Littvay, Central European University (Hungary) Budapest 2009 I hereby declare that this work contains no materials accepted for any other degrees in any other institutions. This thesis contains no materials previously written and/or published by another person, unless otherwise noted. CEU eTD Collection ii Abstract The question ‘What type of bureaucracy is most likely to enable sustainable prosperity for all members of a society?’ is a classical puzzle in the field of political science. This thesis investigates this research question both theoretically and empirically. It draws on Gary Miller’s (2000) theory of interactive social production, which advocates the welfare- enhancing properties of a de-politicized bureaucracy (or civil service), and develops it further by showing the capacity of individual elements of civil service to contain politicians’ moral hazard. This theoretical argument is then investigated within the empirical milieu of regional governance of post-Soviet Russia. Having revisited Meyer-Sahling’s analytical framework of formal political discretion (2003, 2006), the thesis employs the improved framework to systematically assess the provisions of Russia’s two major Civil Service Acts of 1995 and 2004. This analysis shows that, from a legalistic point of view, Russia’s personnel policy regime can be characterized as largely de-politicized. The thesis also examines the implementation of the law in practice in a large sample of Russia’s regions. The expert-based evaluation of personnel practices revealed a striking variation in de-facto de-politicization of Russia’s regional bureaucracy. This is the first systematic measurement of the organizational structure of public bureaucracy in post- Soviet countries and makes a welcome contribution to comparative public administration research. Statistical analysis, subject of chapter 4, shows that, controlling for relevant factors, the striking variation in the levels of aggregate economic performance and small business growth observed across Russia’s regions is accounted for by the extent to which bureaucracy is de- politicized. Two cases-studies from the context of post-Soviet Russia further illuminate the working of the causal mechanism. These quantitative and qualitative analyses constitute the first empirical verification of Miller’s theoretical explanation of the welfare-enhancing properties of de-politicized bureaucracies, which perhaps is the most important contribution that this dissertation has made. The documented variation in de-facto de-politicization of bureaucracy in Russia’s regions allows an inquiry into the reasons for the adoption of real merit, which is a persistent puzzle in social science. Whilst dominant explanations underscore the importance of interactions among core constituencies of voters, legislators, and executives in democratic settings, they fail to explain the adoption of merit in autocracies and are not corroborated empirically outside the Anglo-Saxon world. Utilizing analytical tools from game theory, this thesis offers an alternative – formal and parsimonious – theoretical explanation as to the conditions under which self-interested politicians opt to curb their authority over bureaucratic personnel decisions. Central to this explanation is the idea of the ruler’s discount rate or time horizons, which reflects the ruler’s strategic thinking over time as affected by the likely reaction of economic agents to the ruler’s choices. The thesis also subjects this theory to CEU eTD Collection empirical test, using the obtained measure of de-politicization of bureaucracy as dependent variable. Controlling for factors from existing theories, it is found that rulers’ discount rate is the most powerful predictor of the level of de-politicization of bureaucracy. By challenging conventional wisdom about the factors that lead to the adoption of civil service, this thesis represents both theoretical and empirical contributions to the literature on merit adoption. iii Acknowledgements I would like to thank all those people who believed in the conceptual maturity, feasibility and potential scientific contribution of this project. Namely, I would like to thank my supervisor Tamás Meszerics, who stood by me from beginning to end, and Gary Miller who, from the early stages, has encouraged my ideas and the general approach to the research question. My gratitude goes to Alexandra and Lee Benham for introducing me the world of social science discovery, for their help in facilitating my research stay at Washington University in St. Louis and their constant support. I owe a special word of thanks to the tutors and students of the Ph.D. in Public Policy program at University of North Carolina (Charlotte), who helped me to sharpen my theoretical argument and better prepare the field research. I would like to acknowledge the conceptual contribution of Victor Lapuente to the theoretical model discussed in chapter 5 of this thesis. The financial contribution of Central European University and the Institute for Humane Studies at George Mason University is gratefully acknowledged. I thank all of the experts who took part in this research for their courage to speak on the sensitive topic of personnel policy in Russia’s local government and for the time they devoted to the project. As I made numerous trips around Russia and several other places, I would like to thank all those people who made me feel welcome at their homes. Particular thanks are due to Rita Fóber, Nandor Horgos and the late Annamária Kóbor in Budapest and Stephanus van Shalkwyk in St. Louis. I am thankful to my friends Victoria Timoschuk and Marina Popova for their precious support in the course of this project and beyond. I am, however, most indebted to my husband John: without his love and patience the completion of this thesis would most certainly not have been possible. CEU eTD Collection iv List of Tables and Figures Table 2.1 Russia’s System of State Governance, 1995-2003, Established by FZ-119 On the Fundamentals of the State Service …………………………………………………… 47 Table 2.2 Employed in Russia’s State Organs of the Executive Branch of Power: 1995, 2000, 2006, including auxiliary staff (thousands/per cent) ……………………… 47 Table 2.3 Legal Definitions of the Authority of State Posts, stipulated by FZ-119 …… 49 Table 2.4 Types of Decision-Making Authority and Degrees of Formal Political Discretion ………………………………………………………………………………. 53 Table 2.5 Typology of Personnel Policy Regimes …………………………………….. 58 Table 2.6 Conditions Under which Individuals cannot be Admitted to (or continue to hold) a State Service Position ………………………………………………………… 62 Table 2.7 Obligatory Qualifying Requirements for Posts of Category “C” under FZ- 119 ……………………………………………………………………………………. 69 Table 2.8 Appointing Schemes Authorized by FZ-119 ………………………………. 75 Table 2.9 Basic Duties of the State Servant under FZ-119 …………………………… 81 Table 2.10 Restrictions, Arising from the Membership in Russia’s Public Bureaucracy, Under FZ-119 …………………………………………………………… 82 Table 2.11 Russia’s Personnel Policy Regime (Formal Merit) Under FZ-119 and FZ- 79 ……………………………………………………………………………………… 99 Table 3.1 Regional Coverage (Cases) ………………………………………………… 116 Table 3.2 Other Experts ………………………………………………………………. 119 Table 3.3 Provisions of FZ-119 and FZ-79 Compared (%) …………………………… 121 Table 3.4 Average Number of Job Applications per Vacancy by Groups of Experts and Across Regions, 2004-2006 ………………………………………………………. 123 Table 3.5 Change in the Average Number of Job Applications per Vacancy, 2004- CEU eTD Collection 2006 and 2000 Compared (N and per cent) …………………………………………… 124 Table 3.6 Proportion of Internal Applicants in the Total Number of Vacancy Contest Applications by Groups of Experts and Across Regions, 2004-2006 …………………. 124 Table 3.7 Proportion of Current Bureaucrats Hired via Formal Vacancy Contests by Groups of Experts and Across Regions, 2006 ………………………………………… 129 v Table 3.8 Number of Outcomes of Formal Vacancy Contests that were Pre-decided by Groups of Experts and Across Regions, 2006 ………………………………………… 129 Table 3.9 Meritocratic Recruitment Index by Groups of Experts and Across Regions, 2006 …………………………………………………………………………. 130 Table 3.10 Change in the Number of Bureaucrats Hired via Formal Vacancy Contests, 2005-2006 Compared to 2004 and 2000 (%) ………………………………………….. 132 Table 3.11 Proportion of Bureaucratic Posts of Higher Importance Filled via Formal Vacancy Contest, 2004-2006 (%) ……………………………………………………… 133 Table 3.12 Promotion by Contest: Proportion of Bureaucratic Posts of Higher Importance Filled via Formal Vacancy Contests by Groups of Experts and Across Regions, 2004-2006 …………………………………………………………… 133 Table 3.13 Other Methods of Filling Bureaucratic Posts of Higher Importance (%) …. 134 Table 3.14 Frequency at which Currently Working Bureaucrats were Assigned to Positions of Higher Importance Temporarily , 2004-2006, (%) ……………………….. 137 Table 3.15 Reasons for Temporary Promotions (%) ………………………………….. 138 Table 3.16 Frequency at which Currently Working Bureaucrats were Demoted to a Position of Lesser Importance,

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