Hamilton’s Paradox: The Promise and Peril of Fiscal Federalism

Half-title......Page 3
Series-title......Page 5
Title......Page 7
Copyright......Page 8
Dedication......Page 9
Contents......Page 11
Preface......Page 13
Acknowledgments......Page 17
1 Introduction and Overview......Page 19
I. Promise and Peril......Page 22
II. Federalism and Sovereignty......Page 24
III. Fiscal Institutions......Page 26
IV. Political Institutions......Page 28
V. Case Studies......Page 29
VI. Endogenous Institutions......Page 30
VII. Policy Implications......Page 32
2 Promise and Peril: Intellectual History......Page 33
I. A Brief Intellectual History of Federalism in Economics and Political Science......Page 34
II. The Promise of Fiscal Discipline......Page 38
III. A Closer Look at Definitions and Data......Page 41
Decentralization......Page 43
Federalism......Page 49
IV. Sorting Out the Promise and Peril: The Political Economy Approach......Page 58
3 Sovereignty and Commitment......Page 66
I. The Bailout Game......Page 68
II. The United States in the Nineteenth Century......Page 73
The Bailout Game in Action......Page 75
Externalities and the Structure of Jurisdictions......Page 85
III. Looking Ahead......Page 89
Appendix 3.1......Page 90
4 The Power of the Purse: Intergovernmental  Grants and Fiscal Discipline......Page 93
I. Intergovernmental Finance and Commitment......Page 94
II. Credit Ratings and Bailout Expectations......Page 98
Borrowing Restrictions......Page 112
Summary of Hypotheses......Page 116
Main Variables......Page 117
Control Variables......Page 119
V. Cross-Section Analysis......Page 121
VI. Time Series Cross-Section Analysis......Page 127
VII. Total Public Sector Deficits......Page 131
VIII. Summary of Results......Page 134
IX. Looking Ahead......Page 135
5 Disease or Cure?: Political Parties and Fiscal Discipline......Page 137
I. Bailouts and Political Incentives......Page 139
Zero-Sum Bailouts......Page 140
Negative-Sum Bailouts......Page 141
II. Parties and Legislatures......Page 142
III. Electoral Externalities......Page 143
IV. Empirical Analysis......Page 146
V. A Closer Look at Measurement......Page 150
VI. Conclusion......Page 155
6 An Approach to Comparative Case Studies......Page 158
I. Subnational Sovereignty and Fiscal Discipline......Page 159
II. The Political Economy of Semisovereignty: The Logic of the Case Studies......Page 165
7 Fiscal Federalism and Bailouts in Postwar Germany......Page 171
Fiscal Federalism......Page 175
Political Federalism......Page 180
II. The Bailout Game in Action: Bremen and Saarland......Page 181
III. Explaining Differences across the Landerh......Page 184
Control Variables......Page 189
Electoral Competitiveness......Page 193
Empirical Approach......Page 194
V. Conclusion......Page 203
8 The Crisis of Fiscal Federalism in Brazil......Page 206
Fiscal Federalism......Page 208
Political Federalism......Page 219
II. State-Level Fiscal Crises and Bailouts......Page 222
Background......Page 223
The Most Recent Crisis......Page 224
Intergovermental Debt Negotiations......Page 227
Who Benefited from Bailouts?......Page 230
III. Explaining Variation across States......Page 232
IV. Conclusions: Germany and Brazil......Page 240
9 The Challenge of Reform in Federations......Page 244
I. Breaking out of the Joint-Decision Trap: The Role of Electoral Externalities......Page 247
II. Case Studies......Page 250
Canada......Page 251
Australia......Page 256
Germany......Page 258
Brazil......Page 262
III. Conclusion......Page 266
10 The Origins of Subnational Sovereignty......Page 268
Germany......Page 270
Brazil......Page 273
Lessons......Page 276
II. Toward a Comparative Theory of Dual Fiscal Sovereignty......Page 279
Political Parties Revisited......Page 280
Inequality and Economic Geography......Page 283
III. Conclusion......Page 285
I. Hamilton’s Paradox Revisited......Page 287
II. Key Arguments and Findings......Page 288
III. Policy Implications......Page 293
IV. Directions for Future Research......Page 298
References......Page 301
index......Page 319