Political Institutions and Fiscal Federalism

• In Event: Foundations for Sustainable Federalism In Developing Economies

Abstract

Abstract. Authors Charles Hankla, Georgia State University), Euince Heredia-Ortiz (Univeridad . Del Pacifico, Peru) and Raul Ponce Rodigue (Universidad Autonoma de Ciudad Juarez, Mexico). Scholars have long understood the key role played by political institutions in mediating the impact of decentralization on critical governance outcomes. Especially since the advent of second (and third?) generation fiscal federalism, researchers have increasingly understood that the quality of such institutions can determine whether decentralization reforms live up to their promises. In this paper, we review the scholarship on these issues and present some conclusions and ways forward. We organize our analysis according to the specific decentralization outcomes considered by scholars, grouping them into the economic, political, and social. On the independent variable side, we consider: (1) institutions governing accountability and democracy, (2) institutions related to vertical relationships among tiers, (3) institutions determining horizontal relationships at subnational level, such as those between mayors and assemblies, and (4) the structure and nationalization of parties and party systems. We conclude that, while scholarship over the past few decades has greatly expanded our understanding of how political institutions mediate fiscal federalism, there is still much to learn.

Author

• Charles Hankla, Public Finance Research Cluster, Georgia State University