By Alberto Diaz-Cayeros
This booklet explores the politics of monetary authority, concentrating on the centralization of taxation in Latin the United States in the course of the 20th century. The e-book reviews this factor in nice element for the case of Mexico. The political (and monetary) fragmentation linked to civil conflict at the start of the century was once ultimately reworked right into a hugely centralized regime. The research indicates that economic centralization can most sensible be studied because the final result of a cut price struck among self-interested neighborhood and nationwide politicians. financial centralization was once extra severe in Mexico than in such a lot different areas on the planet, however the demanding situations and difficulties tackled by way of Mexican politicians weren't distinctive. The e-book hence analyzes monetary centralization and the origins of intergovernmental monetary transfers within the different Latin American federal regimes, Argentina, Brazil, and Venezuela. The research sheds mild at the components that specify the consolidation of tax authority in constructing nations.
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Extra info for Federalism, Fiscal Authority, and Centralization in Latin America
Most accounts of the distribution of tax authority and ﬁnancial resources in federal arrangements overlook the fact that this trait is contingent on the party system. That is, state ﬁscal authority and the regional allocation of expenditures will depend on the incentives faced by local politicians according to the way in which political parties structure their political opportunities and careers. The main theoretical argument for limiting the tax authority of state governments rests on the grounds of economic efﬁciency (see Inman and Rubinfeld, 1997).
Federal Bargain in a Simultaneous Game Accept (A ) Reject (R ) Federal Compromise (T ) Unitary Imposition (I ) F − T, T G, L U, D W, W G>W F > U + D, F > 2W To achieve the federal compromise, the transfer must be such that T > L. If the federal government is unable to provide such a transfer (because L > F − W ), it could still avert the conﬂict to the extent that G > W. That is, the federal government can choose to offer a transfer of any size, knowing in advance that the local government will reject it, in order to prevent conﬂict.
This is not to say that no local taxation remains, but the idea is that it must be coordinated with the tax authority of the federal government. To simplify matters, the model assumes that the tax authority local governments keep is encompassed implicitly in the federal transfer. This means that the federal arrangement collects more revenue than the unitary imposition or the taxes exacted by warlords in conﬂict. 19 This is not to say that the federal outcome is necessarily achievable or that the distribution resulting from it is attractive to all players; it only means that under federalism no player can be made better-off without making some other player worse-off.
Federalism, Fiscal Authority, and Centralization in Latin America by Alberto Diaz-Cayeros