Seeds of Inequality: How Legal Design, Administrative Guidance, and Judicial Interpretation Shape Public Service Delivery

Impartiality and equality are foundational principles in public service delivery. Yet, vague formulations in laws can undermine these ideals in practice. When laws lack clarity, they leave more room for discretion in their implementation, resulting in inconsistent administrative decisions across cases and places. Such discretion might be especially consequential for minority groups, as street-level bureaucrats may apply vague thresholds more harshly. Though existing research shows that administrative factors contribute to unequal outcomes, we know less about the mechanisms through which a law’s design—particularly the use of indeterminate terms—is reflected in administrative practices and contributes to social inequalities. To address this gap, we develop a theory of the “legal-administrative-judicial pipeline”, expecting that legal vagueness increases variation in welfare provision across local agencies. Imprecise terms generate uncertainty for implementers in terms of how to use their discretion, resulting in less consistent decisions over time and space, with the potential for minorities to be disproportionately disadvantaged. Next, we argue that such vagueness can be resolved through administrative directives and court rulings. We expect that the vaguer a law’s provisions, the more administrative directives and legal disputes they generate. When vague terms are clarified through administrative directives or judicial interpretation, we anticipate to find more consistent outcomes. We test these expectations in the German social benefit system, an ideal test case: though legislation is centralized, implementation is decentralized across 405 local job centers. Empirically, we draw on an original dataset integrating multiple sources: the Social Code and its amendments, more than 1,000 administrative guidelines, over 8,000 social court rulings, and agency-level outcome data from 2010-2022. We first use natural language processing to identify vague legal terms (e.g., “substantial”, “important reason”). Using panel data estimators, we then identify how vagueness affects the practice of welfare service delivery to persons with and without German nationality. Finally, we consider how the problem of vagueness is resolved by investigating whether administrative directives and judicial interpretations serve to clarify vague provisions, and thereby reduce differences in outcomes for the two groups. The study offers new evidence on the legal-institutional roots of inequality in welfare states. By showing how legal design interacts with administrative and judicial clarification, we consider how inequality can be a product of the language of the law itself. This understanding can help legal drafters formulate laws accordingly, street-level bureaucrats apply laws more consistently, and administrators consider how directives resolve vague terms.