This study began out of a nagging curiosity about the nature of income inequality in Russia. Why did it rise so sharply after the transition from communism, and why has it stayed so high? Is income inequality in Russia driven by similar forces to those that have been deepening inequality in the United States for the last three decades? What are the effects of democratization on inequality? My initial assumption was that, generally speaking, where democratic political institutions were more effective, inequality would be lower, although whether this was a result of redistribution after market forces had yielded an initial differentiation of earnings, or affected the very structure of earnings, seemed an open question.

I also wanted to understand the three-way interaction among inequality, democracy, and that diffuse, intangible quality of public life that is often termed “governance.” Governance is a multifaceted concept, arguably too diffuse to be treated as a single concept at all. As Daniel Kaufmann and his associates at the World Bank Institute treat it, it is a way of characterizing “the set of traditions and institutions by which authority in a country is exercised.” This is reasonably broad, but the multiple studies of governance carried out by the World Bank Institute team have demonstrated that assessments of the quality of six sets of institutions by which governance is defined tend to be well correlated, and in fact help predict countries' economic performance.