Unconditional Transfers Are Not Oil: The Economic Foundations of Subnational Undemocratic Regime Reproduction

Abstract

Extant research on rentierism claims that oil royalties and unconditional transfers are among the main factors sustaining subnational undemocratic regimes (SURs). This article claims that these revenues are insufficient to economically reproduce SUR, as subnational rentier states generally overspend beyond their means. Drawing on evidence from Argentina, we identify two pathways to SUR reproduction. First, rulers in resource-rich provinces rely on 'hidden rents' from local extractive industries to sustain long-term spending. Second, rulers in resource-poor provinces heavily subsidised by fiscal institutions resort to discretionary grants from presidents to reproduce their political regimes.