Making the Grade in Transition: Equality, Transparency, Trust, and Fairness

Abstract

Trust in both people and in government are in short supply in transition countries. Corruption is generally very high and the quality of the legal systems are also not high. First, we examine some aggregate data showing that transition countries with increasing inequality also are likely to have high levels of corruption, large informal sectors, and unfair legal systems. We then move to an examination of Romanian public opinion in a survey conducted in 2003. There we estimate a multiple equation model linking perceptions of increasing inequality to less confidence for the future, the perception of high-level corruption, less trust in both other people and government, and a demand to redistribute income away from the rich. We argue that this syndrome makes a successful transition to a market democracy difficult.

Keywords: trust, social capital, informal sector, transition

JEL Classification: Z13, D63, E26, P26