A Political Economy Explanation for In-kind Redistribution: The Interplay of Corruption and Democracy

Zohal Hessami, Claudio Thum () and Silke Uebelmesser
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Claudio Thum: Center for Economic Studies, University of Munich, Germany

No 2012-25, Working Paper Series of the Department of Economics, University of Konstanz from Department of Economics, University of Konstanz

Abstract: This paper identifies a novel political-economy explanation for the observed variation in the cash and in-kind (basic health care, public housing or food stamps) mixture of social transfers. We put forward the hypothesis that the share of in-kind transfers is positively correlated with corruption in democratic countries. The argument is derived in a theoretical model which assumes that it is easier for politicians to appropriate cash transfers than in-kind transfers. Voters in corrupt countries know that cash transfers invite corrupt behavior and therefore they elect parties that opt for in-kind redistributive measures. The empirical analysis for 34 OECD countries over the 1984 – 2007 period provides robust evidence in favor of this hypothesis. Moreover, the positive correlation between the in-kind share of social transfers and perceived corruption is stronger for the “most democratic” OECD countries and in countries with specific institutional characteristics such as free media that further enhance democratic accountability.

Keywords: In-kind social transfers; redistribution; corruption; democracy; social expenditures (search for similar items in EconPapers)
JEL-codes: D7 H42 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2012-11-19
New Economics Papers: this item is included in nep-cdm, nep-pbe and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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