The redistributive effects of centralization and decentralization across subnational units

Abstract

Abstract: Several scholars havearguedthat decentralization benefits statesand municipalities, grantingthemmoreautonomyfor managing theirbudgets andmoreresources to deliver theirservices. Othershavequestioned this assertion, claiming that decentralization makes subnational units morefiscallydependent oncentral governments. This articleargues that thefiscal impactofdecentralization must bedifferentiated across states. It theoretically specifies and empirically demonstrates whichstates benefit during periods of decentralization andcentralization. It argues that powerful presidents whocentralize resources have imposed greater costson moredeveloped andfiscally independent districts (which prefer to administertheirown resources and can beserious challengers to presidential power), thus relyingmainlyonsupportfrom lessdeveloped andmorefiscally dependent provinces, whichprefer moreredistribution. I present empirical evidence for Argentina (1983-2004), a developing federation with stronggovernors and highcrossregional inequality, anddiscuss someimplications for comparative studieson the topic.