Abstract
What determines the relative strength of central and regional governments? Why do centers engage in more or less geographically based economic redistribution? And why do some centers redistribute from urban to rural areas while others do the opposite? This research answers these questions with reference to decentralized politics at key constitutional moments. Much contemporary research underscores the importance of the intergovernmental balance of power – be it in taxing authority or decision making autonomy – on economic outcomes. Many features of that balance are rooted in bargains struck at the time of constitution writing. Here, I suggest that the key ingredients in such bargains are the number of conflicting geographically salient factor endowments, the distribution of inter-regional inequality, and the degree of intra-state inequality within rural and urban regions. The greater the level of factoral conflict, the more elites who engage in constitutional negotiations are likely to constrain the central government by providing for substantial regional veto authority. Higher levels of inter-regional inequality heighten demands for inter-regional redistribution. Given some level of regional demand for central redistribution, whether its net effect is in favor of urban or rural regions will depend on the coalitional implications of inequality within regions. I examine the argument in light of the U.S., Argentine, and Indian processes of constitution formation.
Similar content being viewed by others
References
A., Ades E. Glaesser (1995) ArticleTitleTrade and Circuses: Explaining Urban Giants Quarterly Journal of Economics 110 195–227
Banerjee, A., and Lakshmi Iyer (2002) “History, Institutions and Economic Performance: The Legacy of Colonial Land Tenure Systems in India.” Ms. Department of Economics, MIT
R. Bates (1981) Markets and States in Tropical Africa University of California Press Berkeley
N. Botana (1998) El Orden Conservador: La Política Argentina Entre 1880 y 1916 Editorial Sudamericana Buenos Aires
P. R. Brass (1982) Pluralism, Regionalism and Decentralizing Tendencies in Contemporary Indian Politics Wilson Wilson (Eds) The States of South Asia C. Hurst & Co London
P. R. Brass (1990) The Politics of India since Independence Cambridge University Press New York
Brennan, G. and Buchanan, J. (1980) The Power to Tax: Analytical Foundations of a Fiscal Constitution. Cambridge: Cambridge University Press
M. Cain K. Dougherty (1999) ArticleTitleSuppressing Shays’ Rebellion: Collective Action and Constitutional Design Under the Articles of Confederation Journal of Theoretical Politics 11 233–60
Clark, G. and Wolcott, S. (2002) One Polity, Many Countries: Economic Growth in India, 1873–2000, Working Paper, University of California-Davis
R. Dahl (2002) How Democratic is the American Constitution? Yale University Press New Haven
H. H. Das B. C. Choudhury (1990) Federal and State Politics in India Discovery Publishing House New Delhi
Engerman, S., and Kenneth, L. S. (2001) “The Evolution of Suffrage Institutions in the New World”. NBER Working Paper 8512
H. S. Ferns (1973) The Argentine Republic, 1516–1971 Barnes and Noble New York
M. Fillipov P. Ordeshook O. Shvetsova (2004) Designing Federalism: A Theory of Self-Sustainable Federal Institutions Cambridge University Press New York
E. Gibson T. Falleti (2004) Unity by the Stick: Regional Conflict and the Origins of Argentine Federalism Gibson (Eds) Federalism and Democracy in Latin America Johns Hopkins University Press Baltimore
Gibson, E., Ernesto, C., and Tulia, F. (2004) “Reallocative Federalism: Overrepresentation and Public Spending in the Western Hemisphere.” In Federalism: Latin America in Comparative Perspective. Baltimore: Johns Hopkins University Press
Government of India. Department of Statistics, Ministry of Planning and Programme Implementation. Various Years. Statistical Abstract of India. New Delhi: Government of India
K.L. Hall (1992) Major Problems in American Constitutional History. Volume 1: The Colonial Era Through Reconstruction D.C. Heath and Company Lexington, MA
Elster, J. (1995) “The Impact of Constitutions on Economic Performance.” Proceedings of the World Bank Annual Conference on Development Economics 1994, pp. 209–239. Washington: World Bank
Griffiths, S. P. (1952) Modern India. London: E. Benn
K. Hall (Eds) (1992) Major Problems in American Constitutional History: Volume 1 – The Colonial Era Through Construction D.C. Heath and Company Lexington
R. Hardin (1988) ArticleTitleConstitutional Political Economy – Agreement on Rules British Journal of Political Science 18 513–30
R. Hardin (1989) “Why a Constitution?” Groman Wittman (Eds) The Federalist Papers and the New Institutionalism Agathon Press New York
Iarzczower M., Sebastian S., and Mariano T. (2002) “Coming Together: The Industrial Organization of Federalism”, Manuscript, Universidad de San Andres, Argentina
A. H. Jones (1977) American Colonial Wealth: Documents and Methods Arno Press New York
P. Krugman (1991) Geography and Trade MIT Press Cambridge
Lacoste, P. 1990. Hegemonia Y Poder En El Oeste De Argentina. Buenos Aires: Centro Editor de América Latina
D. S. Landes (1999) The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor W.W. Norton & Co New York, NY
J. L. Larson (2001) Internal Improvement: National Public Works and the Promise of Popular Government in the Early United States University of North Carolina Press Chapel Hill, NC
F. Lee B. Oppenheimer (1999) Sizing Up the Senate: The Unequal Consequences of Equal Representation University of Chicago Press Chicago
M. Levi (1988) Of Rule and Revenue University of California Press Berkeley
Mahalanobis, P. C. (1956) “Draft Recommendation for the Formulation of the Second Five Year Plan.” In India Planning Commission, Second Five Year Plan. New Delhi
A. Meltzer S. Richard (1981) ArticleTitleA Rational Theory of the Size of Government Journal of Political Economy 89 914–27 Occurrence Handle10.1086/261013
R. Moore (1982) “India in 1947: The Limits of Unity” Wilson Wilson (Eds) The States of South Asia C. Hurst & Co London
I. Narain (1988) “Federal Reality in India: Empirical Referents and Hypotheses” C. Lloyd Brown-John (Eds) Centralizing and Decentralizing Trends in Federal States University Press of America New York
B. Natarajan (1949) An Essay on National Income and Expenditure in India Government Press Madras
B. R. Nayar (1972) The Modernization Imperative and India Planning Vikas Delhi
D. North (1961) The Economic Growth of the United States, 1790–1860 Prentice-Hall Englewood Cliffs
D. North B. Weingast (1989) ArticleTitleConstitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth Century England Journal of Economic History 49 IssueID4 803–32
W. E. Oates (1972) Fiscal Federalism Harcourt, Brace, Jovanovich New York
M. Olson (1993) ArticleTitleDictatorship, Democracy, and Development American Political Science Review 87 567–76
P. Onuf (1987) Statehood and Union: A History of the Northwest Ordinance University of Indiana Press Bloomington
V. Ostrom (1987) The Political Theory of a Compound Republic University of Nebraska Press Lincoln
U. Panizza (1999) ArticleTitleOn the Determinants of Fiscal Centralization: Theory and Evidence Journal of Public Economics 74 97–139 Occurrence Handle10.1016/S0047-2727(99)00020-1
A. Przeworski (1991) Democracy and the Market Cambridge University Press Cambridge
Przeworski, A. (2003) “Institutions Matter?” Working Paper, NYU
K. L., Remmer E. Wibbels (2000) ArticleTitleThe Subnational Politics of Economic Adjustment: Provincial Politics and Fiscal Performance in Argentina Comparative Political Studies 33 419–451
W. H. Riker (1964) Federalism: Origin, Operation, Significance Little, Brown and Company Boston
W. H. Riker (1980) ArticleTitleImplications of the Disequlibria of Majority Rule for the Study of Institutions American Political Science Review 74 432–46
D. Rock (1985) Argentina, 1516–1982: From Spanish Colonization to the Falklands War University of California Press Berkeley
D. Rock (1987) Argentina 1516–1987: From Spanish Colonization to Alfonsín University of California Press Berkeley
D. Rock (2002) State Building and Political Movements in Argentina, 1860–1916 Stanford University Press Stanford
J. Rodden (2002) ArticleTitleThe Dilemma of Fiscal Federalism: Grants and Fiscal Performance Around the World American Journal of Political Science 46 670–687
J. Rodden E. Wibbels (2002) ArticleTitleBeyond the Fiction of Federalism: Macroeconomic Management in Multi-Tiered Systems World Politics 54 494–531
J. Rodden G. Eskeland J. Litvack (Eds) (2003) Fiscal Decentralization and the Challenge of Soft Budget Constraints MIT University Press Cambridge
R. Rogowski (1988) Commerce and Coalitions: How Trade Affects Domestic Political Alignments Princeton University Press Princeton, NJ
L. Sawers (1996) The Other Argentina: The Interior and National Development Westview Press Boulder
A. M. Sbragia (1996) Debt Wish: Entrepreneurial Cities, U.S. Federalism, and Economic Development University of Pittsburgh Press Pittsburgh
N. Schofield (2000) ArticleTitleConstitutional Quandaries and Critical Elections Politics, Philosophy, and Economics Sept 5–36
N. Schofield (2000b) ArticleTitleConstitutional Political Economy: On the Possibility of Combining Rational Choice Theory and Comparative Politics Annual Review of Political Science 3 277–303 Occurrence Handle10.1146/annurev.polisci.3.1.277
J. Scobie (1971) Argentina: A City and a Nation Oxford University Press New York
A. Sinha (2004) ArticleTitleThe Changing Political Economy of Federalism in India: A Historical Institutionalist Approach India Review 3 24–46 Occurrence Handle10.1080/14736480490443085
K., Sokoloff S. Engerman (2000) ArticleTitleInstitutions, Factor Endowments, and Paths of Development in the New World Journal of Economic Perspectives XIV 217–32
A. Stepan (1999) ArticleTitleFederalism and Democracy: Beyond the U.S. Model Journal of Democracy 10 19–34
J. A. Terry (1912) Finanzas Buenos Aires Librería Juridica
C. Tiebout (1956) ArticleTitleA Pure Theory of Local Expenditures Journal of Political Economy 64 416–24 Occurrence Handle10.1086/257839
C. Tilly (1990) Coercion, Capital, and European States, A.D. 990–1990 Basil Blackwell Cambridge, MA
D. Treisman (2000) ArticleTitleDecentralization and Inflation: Commitment, Collective Action, or Continuity? American Political Science Review 94 837–858
Wallis, J. J. (2002) “Constitutions, Corporations, and Internal Improvements: American States, 1842–1852”. Unpublished manuscript, University of Maryland Department of Economics
Wallis, J., and Barry, W. (2004) “Equilibrium Impotence: Why the States and Not the American National Government Financed Infrastructure Investment in the Antebellum Era.” Unpublished manuscript, University of Maryland Department of Economics
M. Weiner (1963) Politics of Scarcity: Public Pressure and Political Response in India University of Chicago Press Chicago
M. Weiner (1967) Party Building in a New Nation: The India National Congress University of Chicago Press Chicago
B. R. Weingast (1995) ArticleTitleThe Economic Role of Political Institutions: Market-Preserving Federalism and Economic Growth Journal of Law, Economics, and Organization 11 1–31
Weingast, B. (2003) “Self-Enforcing Constitutions.” Manuscript, Stanford University
E. Wibbels (2000) ArticleTitleFederalism and the Politics of Macroeconomic Policy and Performance American Journal of Political Science 44 687–702
Wibbels, E. (2003) “Bailouts, Budget Constraints, and Leviathans: Comparative Federalism and Lessons from the Early U.S.” Comparative Political Studies. 36: 475–508
G. Wood (1969) The Creation of the American Republic, 1776–1787 Norton and Company New York
Author information
Authors and Affiliations
Additional information
JEL classification: P16
The author would like to thank Olga Shvetsova, Tom Schwartz, and other participants of the Duke University “Micro Foundations of Federal Institutional Stability” Conference for their helpful comments.
Rights and permissions
About this article
Cite this article
Wibbels, E. Decentralized Governance, Constitution Formation, and Redistribution. Constit Polit Econ 16, 161–188 (2005). https://doi.org/10.1007/s10602-005-2234-6
Issue Date:
DOI: https://doi.org/10.1007/s10602-005-2234-6