Globalization, Political Institutions, and Redistribution in Central and Eastern Europe

Abstract

We examine the role of political institutions in mediating the effects of globalization on economic redistribution in Central and Eastern Europe. The region represents a least-likely case of welfare state resilience in the face of global economic pressures given its reliance on foreign capital and considerable domestic elite support for neoliberal recipes during the postcommunist transition. Yet, contrary to the race-to-the-bottom hypothesis and consistent with the compensation perspective, we find that economic openness is on average related to higher redistribution. Using the high-quality European Union Statistics on Income and Living Conditions database for 2004–2018, we find that this effect is particularly pronounced in institutional environments where votes are more accurately translated into legislative seats (low disproportionality) and where governments face greater scrutiny both during elections (vertical accountability) and between them (diagonal accountability). Thus, even in a region that adopted “competitive deregulation,” the downward pressures of globalization were limited by electoral pressures for economic redistribution.