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against which interregional redistribution provides insurance. In this sense,
mobility operates both as a mechanism muting the decentralizing effects of
large interregional income and labor market disparities and as an engine behind
the support for more redistribution between territories.
To summarize, this topic identifies the interaction between economic geog-
raphy and representation and the level of cross-regional mobility as the two
mechanisms driving the political geography of inequality. In the next section I
discuss the main difficulties ahead in identifying their effects, theoretically and
empirically.
CHALLENGES AND THE ROAD AHEAD
The relationship between fiscal structures and economic geography is a long-
term, dynamic one in which feedback processes play an important role. By
feedback I mean a process by which institutions alter their environment in
ways that either contribute to their stability or facilitate change (Greif and
Laitin 2004; Pierson
2004
; Thelen
2004
). Over time, the very distributive
consequences of fiscal arrangements nurture contentions about their stability
and condition their institutional environment.
21
This raises a critical issue in this study: fiscal structures, political representa-
tion, and inequality are jointly endogenous in the long run. As detected by three
recent reviews of the field (Beramendi
2007b
; Rodden
2006
; Wibbels
2006b
),
issues of reverse causality and selection have become more and more prominent
as the literature has managed to find causal arrows running in all possible direc-
tions. That is, fiscal structures, political representation (or dimensions thereof),
and inequality appear as both causes and effects at different stages of history.
This triggers a number of challenges concerning the theoretical and empirical
identification of the relationship between fiscal structures and their economic
and political determinants. If fiscal structures are themselves endogenous with
respect to preexisting distributions of income, do they really have causal effects
of their own, or do they operate as mechanisms that merely reproduce pre-
existing economic conditions? In what sense are political representation or
mobility exogenous? In other words, how can one differentiate empirically the
conditions under which institutions are created from the institutional effects
themselves?
A tempting response is to argue, in line with venerable traditions in classical
political economy, that insofar as institutions are endogenous, their effects are
self-selected and therefore essentially superfluous. If institutions just reproduce
the underlying tastes of the relevant political coalition, they do not really mat-
ter per se. Through a different route, we would revisit the early, and rather
21
As elaborated in detailed in
Chapter 3
, a growing body of literature suggests that more decen-
tralized fiscal structures lead to: demands for changes in electoral rules, the increase of territorial
chambers' power, and more decentralized political parties (Amat, Jurado and Leon
2010
;Bera-
mendi and Maiz
2004
; Brancatti
2009
; Chhibber and Kollman
2004
).
