Testing Riker's party-based theory of federalism: The Argentine case

This study seeks to advance our understanding of the institutional underpinnings of federalism by evaluating William H. Riker's study of party causality. Using data from federal funds transfers in Argentina, a federation exhibiting high levels of fiscal decentralization despite its centralized party system, it is shown that when governorships are held by opposition parties, the overall amount of federal funds transferred to provinces increases considerably. In addition, changes in the partisan composition of the national government are also associated with steep increases in the share of provincial federal funds, whereas, more controversially and challenging prominent recent studies of decentralization in Latin America, divided government at the national level leads to centralization of intergovernmental funds. These findings support Riker's contention that political parties exercise a decisive influence over the distribution of fiscal powers between states and the national government.