Representation and redistribution in federations

Abstract

Many of the world's most populous democracies are political unions composed of states or provinces that are unequally represented in the national legislature. Scattered empirical studies, most of them focusing on the United States, have discovered that overrepresented states appear to receive larger shares of the national budget. Although this relationship is typically attributed to bargaining advantages associated with greater legislative representation, an important threat to empirical identification stems from the fact that the representation scheme was chosen by the provinces. Thus, it is possible that representation and fiscal transfers are both determined by other characteristics of the provinces in a specific country. To obtain an improved estimate of the relationship between representation and redistribution, we collect and analyze provincial-level data from nine federations over several decades, taking advantage of the historical process through which federations formed and expanded. Controlling for a variety of country-and province-level factors and using a variety of estimation techniques, we show that overrepresented provinces in political unions around the world are rather dramatically favored in the distribution of resources.W hen independent political units assemble to create larger entities, they often become embroiled in disputes over representation. Should each unit receive equal representation regardless of size or should representation be based on population? These battles are often fierce in nascent political unions because of the belief that the nature of representation will affect the distribution of resources across regions well into the future.In some of the world's largest democracies, the territorial representation scheme in place today had its roots in a federal bargain from the distant past that left some regions, like New York or Buenos Aires, with far fewer seats per capita than other regions, like Wyoming or La Rioja. In large or diverse nascent political unions like the European Union, Iraq, or Afghanistan, a federal institutional structure that deviates substantially from the principle of "one person, one vote" is often viewed as a requirement for peace and stability.For these federations old and new, an important but unanswered question lingers: To what extent do asymmetries in representation lead to corresponding asymmetries in government policy? Empirical studies in economics and political science have discovered that overrepresented regions appear to receive substantially larger per capita shares of government expenditures (1-4). This research consists primarily of single-country studies, most of them focusing on the United States (5-11).The fact that the representation structure emerged from a bargain among provinces, however, presents a fundamental challenge to empirical estimation of the relationship between representation and redistribution. It is possible that the most independently powerful provinces can most effectively extract both fiscal transfers and advantageous l...

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