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I refer to the set of institutions, most notably party systems, electoral rules,
and legislatures, which translate political preferences into policy choices. The
former explains the set of contending preferences regarding the organization
of interpersonal redistribution and levels of interregional redistribution. The
latter explains the transitions to actual institutional choices and outcomes. This
topic shows how the combination of economic geography and representation
illuminates the long-term foundations of inequality in political unions, thereby
accounting for the observable differences between them.
My analysis provides an alternative framework beyond the simplistic rea-
soning that has dominated the field so far. In the rest of this chapter, I present
the puzzles motivating this study, outline its main arguments, discuss how
the topic contributes to existing literature, and finally, address the challenges
involved in pursuing these arguments empirically and how the topic's structure
responds to them.
PUZZLES: THE DOMINANT VIEW AND ITS LIMITS
The notion that federalism, and more generally fragmented political structures,
necessarily means less redistribution and more inequality runs deep in compar-
ative politics and political economy. A quarter of a century ago, Wildavsky
proclaimed that “there is no escape from a compelling truth: federalism and
equality of result cannot coexist” (Wildavsky
1984
: 68). In a similar spirit, the
notion that “in the American context, Madison, not Marx, seems to be having
the last word” (Lowi
1984
: 379) remains a widely held belief.
4
After all, the
United States remains the most unequal among advanced democratic societies,
and many countries with even more uneven distributions of wealth, such as
Brazil or Mexico, have federal forms of government.
An overview of the intellectual history of the organization of power within
political unions reveals that Lowi and Wildavsky are in excellent company.
Welfare economists see federalism and decentralization as particularly ade-
quate to balance the need to attend to both heterogeneous local preferences
and cross-jurisdictional externalities.
5
Local provision of public goods copes
better with informational asymmetries, preference revelation, and issues of ade-
quacy between policy instruments and people's needs, whereas a central ruler
4
See, among others, Huber, Ragin and Stephens (
1993
); Peterson (
1995
); Peterson and Rom
(
1990
); Prud'homme (
1995
) as well as recent insights from institutional economic history by
Alston and Ferrie (
1999
). On the role of federalism in the development of the American welfare
state, see also Alesina and Glaeser (
2004
). For arguments elaborating on the efficiency gains
associated with federalism, see Buchanan (
1950
,
1995
); Inman and Rubinfield (
1997a
,
1997b
);
Oates (
1999
); Prud'homme (
1995
); Qian and Weingast (
1997
); and Weingast (
1995
). For pos-
itive analyses of the impact of federalism on the economy, see Brennan and Buchanan (
1980
)
Cai and Treisman (
2005
); Rodden (
2006
); Treisman (
2004
,
2007
); and Wibbels (
2005a
).
5
See Gramlich (
1973
,
1987
); Musgrave (
1997
); Oates (
1972
); Oates and Brown (
1987
,
1991
,
1999); Wildasin (
1991
).
