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Over time, the initial decision to decentralize major public services, such as
health, education, and infrastructure building has empowered the capacity of
regional governments as political actors.
6
As a result, political party organi-
zations have become regionalized, not least in some cases, such as Catalonia,
Galicia, or Andalusia, because of the presence of
nationalist
(local) competi-
tors. This, in turn, has exacerbated the demand for further decentralization
of policies and resources, triggering a process in which the decentralization
of political representation and fiscal decentralization are jointly endogenous.
Over time, policy decentralization undermines the political sustainability of
centripetal representation as part of a self-sustained dynamic with no obvious
end in sight.
7
Again, key elements of the system of representation and fiscal
decentralization appear to be jointly endogenous.
Given the tight links over time between decisions about policy decentraliza-
tion and important aspects of the system of representation, the question arises
as to what sort of leverage these chapters provide for the empirical evaluation
of the argument. Clearly these two cases do not serve the purpose of isolating
the marginal causal effects of changes in economic geography, mobility, or
representation. They do, however, serve a related purpose, directly linked to
the role of political representation in shaping fiscal structures.
Put shortly, the analysis of the politics behind the choice of fiscal structures
in the EU and Spain does allow us to capture the importance of the status quo,
that is, of the starting conditions in terms of political representation (centrifugal
vs. centripetal) under which contentions about fiscal structures subsequently
unfold. The relationship between representation and fiscal structures is clearly
endogenous over time, but this does not render the initial choices in terms of
political representation endogenous as well. Recall from earlier discussion that
factors other than distributional considerations, such as geopolitical considera-
tions or historical legacies, did shape the original articulation of representation
in these two unions. The initial balance of power between the center and the
regions in the Treaty of Rome (1957) or the Spanish Constitution (1978)is
in this sense exogenous. As a rich literature on historical legacies and institu-
tional inertia documents (Pierson
2004
), and the model formalizes, these initial
conditions determine who moves first and who holds the possibility of vetoes
over the status quo in terms of fiscal structures. Exploring the dynamics of
6
I offer a more detailed outline of this process in
Chapter 7
.
7
Focusing on a different case, Diaz-Cayeros (
2006
) provides additional evidence of the difficulties
of disentangling institutional choices, electoral concerns, and distributive politics. His innovative
analysis of the institutional dynamics of the Mexican federation reveals that the centralization
of the party system and the centralization of tax policy are jointly endogenous. In this and other
Latin American cases, centralization of tax policy emerges as the outcome of bargaining with
local political elites. The key to the process was to allow rich regions to become richer while using
centralized redistribution to buy the support of the leaders of backward regions. This coalition
between leaders of rich and poor regions alike, Diaz-Cayeros argues, was forged through the
articulation of a national party system.
