Barriers to egalitarianism: Distributive tensions in Latin American federations

Abstract

Latin America’s largest federations have significantly reduced their levels of income inequality in recent years, perhaps reflecting a structural change toward egalitarianism. However, we argue that the political geography of federalism in Argentina, Brazil, and Mexico strongly shapes preferences against centralized redistribution likely to promote equity in the long term. While federalism does not necessary lead to lower redistribution in theory, the geographic spread of income and malapportioned political institutions limit egalitarianism in these nations. These dynamics help explain why fiscal structures are distinct in Latin American federations as compared to federations in high-income countries. First, we show that the territorial structure of inequality and malapportionment are associated with lower redistributive effort in the global context and that the Latin American federations have extreme values for both variables. Second, using a new data set of income distributions within and across Argentina, Brazil, and Mexico over time, we demonstrate that the conditions that favor fiscal transfers from the national to subnational governments are consistently strong, but conditions are rarely favorable for centralized policies to equilibrate national income. Unequal income patterns are reinforced by legislative malapportionment, which encourages interregional transfers to regions and limits the political voice of more populated and unequal regions that would benefit from centralized redistribution.