The Pennsylvania State University The Graduate School College of the Liberal Arts A THEORY OF REDISTRIBUTION IN NEW DEMOCRACIES: HOW HAS DEMOCRACY INCREASED INCOME DISPARITY IN SOUTHERN AND POSTCOMMUNIST EUROPE? A Dissertation in Political Science by Ekrem Karakoç © 2010 Ekrem Karakoç Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy August 2010 The dissertation of Ekrem Karakoç was reviewed and approved* by the following: Michael H. Bernhard Raymond and Miriam Ehrlich Eminent Scholar Chair Department of Political Science University of Florida Co-Chair of Committee and special member Lee Ann Banaszak Associate Professor of Political Science Director of Graduate Studies Co-Chair of Committee Dissertation Advisor Christopher Zorn Liberal Arts Research Professor Department of Political Science Burt L. Monroe Associate Professor of Political Science Mark S. Anner Assistant professor of Labor Studies and Employment Relations, and Political Science *Signatures are on file in the Graduate School iii ABSTRACT In most new democracies, rising inequality poses a challenge to conventional theories in democratization literature because these theories predict that democracies decreases inequality through its positive effects on social welfare programs toward the poor. To the contrary, I present evidence that inequality does not decrease after democratization and ask why is that democracies cannot generate income equality. Then I explore the determinants of inequality and offer three interrelated arguments that explain the paradox between democracy and inequality. I argue that low political participation by the poor and weak political party system institutionalization increases targeted social spending for electoral purposes, thus having regressive effect on inequality. Here I discuss the linkage between social groups and political parties in some cases going back to authoritarian era in underinstitutionalized party systems and how this leads political parties to use targeted spending, which favors some social groups at the expense of the poor. I adopt a multi-method technique to test the theory because it enables this study to process the causal relation as well as generalize its findings. In particular, I use large-N method and then two paired case studies. For the latter, I take two regions of Europe that have experienced democratization since the Third-Wave and adopt „most similar system‟ research design in Turkey and Spain in Southern Europe and the Czech Republic and Poland in the postcommunist Europe. iv TABLE OF CONTENTS LIST OF FIGURES……………………………………………………………………..............viii LIST OF TABLES…………………………………………….……..…………..……….……..ix ACKNOWLEDGEMENTS……………………………………………………………………..xii Chapter 1 ......................................................................................................................................... 1 Research Question .......................................................................................................................... 1 Why New Democracies in Europe? ................................................................................................ 7 Comparative Case Studies .............................................................................................................. 9 Summary of Sections: The Organization of The Dissertation ...................................................... 13 Chapter 2 ....................................................................................................................................... 17 Theory ........................................................................................................................................... 19 Turnout and the Poor ............................................................................................................. 23 Electoral Coalitions and Politics of Redistribution ............................................................... 25 The Effect of Weak Political Party Institutionalization ......................................................... 29 The Effect of Volatility on Social Spending ......................................................................... 32 Targeted Spending and Income Inequality ............................................................................ 36 Chapter 3 ....................................................................................................................................... 46 Testing the Theory ........................................................................................................................ 46 Model for Targeted Spending ....................................................................................................... 48 Dependent Variable: Targeted Spending ............................................................................... 48 Main Independent Variables .................................................................................................. 50 Control Variables ................................................................................................................... 51 Economic Factors .................................................................................................................. 52 Partisanship ............................................................................................................................ 53 Demographic Effects ............................................................................................................. 55 Urbanization .......................................................................................................................... 55 Election Year ......................................................................................................................... 56 Model for Income Inequality ........................................................................................................ 57 Dependent Variable: Income Inequality ................................................................................ 57 v Main Independent Variable: Targeted Spending ................................................................... 57 Control Variables ................................................................................................................... 58 Economic Variables ............................................................................................................... 58 Non-Economic Factors .......................................................................................................... 59 Sample ................................................................................................................................... 60 Methodology .......................................................................................................................... 60 Results ........................................................................................................................................... 61 Findings for Targeted Spending ............................................................................................ 61 Findings for Income Inequality ........................................................................................... 67 Conclusion .................................................................................................................................... 71 Next Chapter ................................................................................................................................. 72 Chapter 4 ....................................................................................................................................... 78 Inequality and Democracy in Postcommunist Countries: Poland and the Czech Republic ......... 78 Social Policy and Inequality under Communism .................................................................. 83 Poland ........................................................................................................................................... 89 Communist Poland ................................................................................................................ 89 Post-transition Era ................................................................................................................. 94 Voter Turnout ........................................................................................................................ 97 Political Parties, Social Policy and Electoral Volatility ...................................................... 102 Political Parties and Their Constituencies ........................................................................... 102 Social Policy and Volatility ................................................................................................. 107 Social Policy in the Early Years of Transition .................................................................... 111 The Czech Republic .................................................................................................................... 119 Communist Czechoslovakia ................................................................................................ 122 Postcommunist Era .............................................................................................................. 125 Voter Turnout ...................................................................................................................... 128 Political Parties and Constituencies ....................................................................................