Regressive Federalism: Tensions Between Territorial and Interpersonal Distribution of Income in Argentina

Abstract

Three characteristics of Argentine federalism that hinder distributive equity are emphasized.  First, our federalism and its very high legislative malapportionment produce incentives for  the distributive agenda to be dominated by the territorial distribution of fiscal resources  among national and subnational governments, rather than by the interpersonal distribution  of income. Secondly, the territorial inequalities produced by the «geological lottery»  (geographic distribution of natural resources) is reinforced in our country by the allocation  of all royalties to the (typically rich) producing provinces. Finally, the co-participation law  itself mandates that some rich provinces receive much higher levels of federal transfers per  capita than other much poorer ones. These regressive aspects of our federalism probably  explain in part that, after long years of governments supposedly committed to  socioeconomic equality, the enormous increase in the size of the Argentine public sector  between the mid-2000s and the mid-2010s, and the implementation of some effectively  equalizing public policies, the country reaches its fourth decade of democracy with worse  levels of inequality than it had at the beginning of the current democratic period.