Decentralized Governance, Constitution Formation, and Redistribution

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.