8. Conclusions
In this paper we have explored the question as to whether legislative malapportionment in the Argentine
Congress is the cause of the observed biases in the country’s federal tax sharing scheme. Using three
quasi-natural experiments, we have shown that legislative malapportionment has had no significant
effect on the federal tax sharing scheme under democratic governments and that there is no evidence
that centralized military governments reduced the bias of the distribution pattern associated with the tax
sharing scheme. We have also developed a simple model of how fiscal policy is determined in a federal
system of government. The model suggests that the share of public revenues received by each local
government is not altered by changes in the political regime when democratic governments are in place
that are dominated by the executive branch but that, conversely, districts that are overrepresented in the
legislature obtain a larger share of revenues under a democracy than under an autocracy when Congress
is not dominated by the executive branch. Finally, we have also argued that the executive branch of the
Argentine government predominates over the legislature and have shown that the extent of the
geographic representativeness of the executive branch of military and democratic governments does not
differ to any significant extent.
These six findings, when taken together, point toward the existence of a more structural type of
equilibrium that determines the distribution of tax revenues among Argentina’s provinces. This
equilibrium is not destabilized by changes in the distribution of the legislative representation of the
provinces or by the nature of the political regime. Our findings also point up some methodological issues.
First, for developing countries, consideration needs to be given to the fact that formal institutions (those
that hold de jure political power) might not be the key determinants of political outcomes and that 37
informal institutions (those holding de facto political power) could be more influential. Indeed, as
Acemoglu and Robinson (2008) show, it may be that the distribution of political power will remain the
same after a major change in the formal institutional framework because those changes can be easily
neutralized by existing informal institutions. In the same vein, our findings suggest that the way in which
the different institutions interact may be a very important factor. Legislative malapportionment could be
an innocuous factor while there is a strong executive branch but could become a key factor (as well as a
source of social conflict) if Congress is empowered.
Second, why do the districts that are net losers accept the biases in the system? In other words, if
legislative malapportionment is the main cause of a biased distribution of resources, why do the losers
agree or allow themselves to be underrepresented? If other institutions (e.g., informal bargaining
between the president and the governors) are generating the biases, why are these informal institutions
allowed to continue to exist? All this suggests that, ultimately, there must be some more deep-seated type
of equilibrium that determines the distribution of tax revenues among subnational entities. We
conjecture that, in developed countries, this equilibrium is reflected in a country’s formal institutions,
(e.g., the number of representatives that each district has in the legislature), while, in developing
countries, this equilibrium is reflected in the bargaining power of each district in the informal
negotiations that determine the geographic distribution of resources.