Collaborative Research: States, Rates and the Fates of Federations: Provincial Politics and Fiscal Policy Around the World

University Of Washington, Seattle WA

Investigators

Abstract

This investigation supports the completion of a large data set that makes it possible to conduct comparative analysis of provincial-level fiscal performance in federations around the world. In recent years, central governments in federations have devolved profound functional responsibilities to provincial governments. Concurrently, there has been renewed interest in federalism as a tool to solve issues of regional governance in settings as diverse as the European Union and South Africa. At the same time, a number of researchers of Russia, Brazil, and Argentina have noted a common pathology whereby federations generate incentives for provincial politicians to over-fish the common pool of revenue, overspend in the expectation of national bailouts, and expend resources on the sustenance of political machines. As a result, the comparative investigation of federalism has become a booming research program at the intersection of political science, economics, and policy studies as researchers attempt to answer questions about the driving forces behind government fiscal decisions and more broadly, the nature of accountability in multi-tiered systems of government. Intellectual Merit: Current research on comparative federalism provides three justifications for the proposed research. First, while some researchers have begun to investigate the institutions that underpin divergent economic outcomes across federations, they have treated federations en toto. There is little recognition that provinces within federations vary dramatically in their incentives and behavior. Second, because of this shortcoming the field has little ground on which to generalize about the conditions under which provincial governments are able to serve a positive mediating role between an increasingly global economy and local citizens, as asserted by many proponents of federalism. Third, the vast majority of research on provincial fiscal policy focuses on the U.S. states, which are quite anomalous and provide a limited foundation for broader theorizing on provincial fiscal performance. Even where researchers have begun to address inter-provincial variations in fiscal policy elsewhere, none of this research has been explicitly comparative. Method: In developing a comparative model of provincial fiscal behavior the researchers begin with four hypotheses culled from their own work and other recent theoretical and empirical literature: (1) Provinces more dependent on fiscal transfers from the central government are more likely to run larger deficits. (2) Under some conditions shared partisanship across levels of government generates incentives for budgetary restraint on the part of provincial governments. (3) Provincial institutions that increase the number of checks and balances on fiscal decision-makers foster overspending. (4) Provinces that lack competitive provincial party systems are more likely to run larger deficits. The investigators test whether these hypotheses are contingent on a variety of other characteristics of each country's fiscal and political system. This collaborative research project requires the collection of comparable political, fiscal, macroeconomic, and demographic data on each provincial government in 18 federal systems from 1978 through the late 1990s. To date with support from their respective universities, the researchers have collected much of the relevant data for Argentina, Australia, Brazil, Canada, Germany, India, Mexico, Nigeria, Pakistan, Switzerland, the United States, and Venezuela. The investigators seek support to complete the collection, coding, and organization of the remaining data, including the addition of Austria, Belgium, Malaysia, Russia, South Africa, and Spain. Broad Impact: The investigators will prepare a series of articles based on each of the research hypotheses above, eventually culminating in a book manuscript written for non-specialists. The research has very important policy implications. Redesigning the basic structure of fiscal federalism to improve fiscal discipline is at the top of the reform agenda in many federations.especially those that have suffered severe macroeconomic consequences of dysfunctional federalism. Moreover, the data set will be made available on the internet to other researchers, and has the potential to become an often-used data resources in comparative politics and economics. Examples of future uses include studies of political accountability in multi-tiered system, trends in inter-regional inequality, redistribution, and risk-sharing.