Reallocative federalism: overrepresentation and public spending in the western hemisphere

Abstract

All federal systems reflect internally the tensions between norms of territorial representation and norms of population (or citizen) representation. Each reflects, in the structure of its constitution, a historically determined balance between these norms. Federal systems across the world display significant variations in the primacy of one norm over the other. The basic question to be explored in this paper is: does the overrepresentation of territories (states or provinces) in national legislatures of federal systems affect the territorial distribution of public spending by federal governments? The hypothesis to be tested is that it does, and that territorial overrepresentation produces a distortion of federal spending which benefits populations living in overrepresented territories. We also introduce a conceptual distinction to capture this connection between territorial overrepresentation and the non-proportional distribution of public funds. Countries where this connection exists are identified as cases of reallocative federalism, whereas countries with territorial patterns of public spending that are proportional to population are identified as cases of proportional federalism.This paper is therefore an inquiry into the political economy of federalism. It explores the extent to which institutional features of federal countries shape the distribution of economic resources between their constituent territorial units. Our evidence is drawn from state and province-level data from the Western Hemisphere's four largest federal countries, the United States of America, Brazil, Mexico, and Argentina.