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This paper seeks to understand the origins of diverse fiscal structures in federations, focusing on the importance of the distributive pressures emerging from the territorial structure of inequality, the rent-seeking incentives that emerge from different patterns in the regional incidence of inequality, and the way in which different institutional contexts privilege incumbents at different levels of government. We focus in the developing federations of Argentina, Brazil, India and Mexico, presenting a new dataset on the territorial structure of inequality. Analytically, we bring up a common logic through which the distributive tensions associated with different structures of inequality shape fiscal structures.

The general conundrum of government in underdeveloped countries is why political officials pursue policies that help maintain themselves in power at the expense of long-term economic growth. We address this puzzle in the context of a specific instance: why land reform in Mexico was designed so poorly as to grant marginally productive farm land, trapping peasants into dependence from the state, rather than -as elsewhere- becoming a major factor underpinning long-term economic development. In Mexico, notwithstanding a programmatic vision grounded in social justice emerging from the Revolution, the PRI-controlled state designed land reform policies that trapped peasants in a system where their livelihood and survival depended on their continual support of the regime. The land granted to Mexican peasants was not an income generating asset that would empower them to escape poverty. The state, through the federal government, made the flow of financial resources and subsidies necessary for peasants to survive (i.e. credit, insurance, seeds and fertilizers) contingent on their electoral behavior.

The most important effort to redesign the Mexican federal arrangement has been the National Fiscal Convention, which produced in the summer of 2004 a series of recommendations to reshape the relationship between the various levels of government. The main impetus that led to the Convention came from an organization that has advanced the collective interests of governors, the CONAGO (Conferencia Nacional de Gobernadores). The chapter is primarily devoted to the analysis of the formation and evolution of CONAGO, and its challenges and successes. The chapter tries to address in particular, whether governors have created an organization that, through its gradual institutionalization, will eventually sidestep the relatively ineffective Senate; or they have just been able to create a relatively ephemeral device that allows them to present a unified front in their negotiations vis-à-vis the federal government, but that will disappear as soon as the cleavages dividing governors from rather heterogeneous states become more salient. This question has implications both to the role of governors in the overall political system as well as the general workings of the Senate and Mexican federalism in the years to come.

Endogenous Institutional Change in the Mexican Senate Comparative Political Studies, (December 2005)

This paper studies the endogenous transformation of the Mexican Senate. Changes in the electoral rules for the Senate composition are explained as an effort by the Partido Revolucionario Institucional (PRI) politicians to protect their majority, in a broader strategy of division and cooptation of its opponents. That strategy expanded seats for the opposition while reducing risks for the incumbent party. The paper calculates, through Monte Carlo simulations, counterfactual scenarios for the composition of the Mexican Senate under alternative electoral rules. Those simulations highlight the inherent uncertainty involved in institutional design. In spite of the demise of the PRI in the 2000 presidential election, the Senate will afford in the foreseeable future veto power to the hitherto hegemonic party.

Federalism and the Mexican National Fiscal Convention Publius (forthcoming, 2006)

This paper argues that the largest challenge for Mexico’s federalism is to design an institutional arrangement that strikes a balance between providing enough devolution of tax and spending authority at the local level, in order to unleash the virtues of competitive federalism, while at the same time retaining a strong federal role in the creation of transfer systems that compensate and redress of the vast inequalities that characterize the country. Reconciling decentralization and redistribution will be difficult, however, because the mismatch between potentially available public resources and the demands to be redressed are of quite a different order of magnitude from those faced in other, more developed, federations.