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Decentralization, Interactive Governance and Income Inequality: a Comparative Study DECENTRALIZATION, INTERACTIVE GOVERNANCE AND INCOME INEQUALITY: A COMPARATIVE STUDY by Yasemin İrepoğlu Carreras BA, International Relations, Koç University, 2004 MA, European Studies, University of Amsterdam, 2005 MA, Political Science, University of Pittsburgh, 2013 Submitted to the Graduate Faculty of the Dietrich School of Arts and Sciences in partial fulfillment of the requirements for the degree of Doctor of Philosophy University of Pittsburgh 2017 UNIVERSITY OF PITTSBURGH THE DIETRICH SCHOOL OF ARTS AND SCIENCES This dissertation was presented by Yasemin İrepoğlu Carreras It was defended on March 29, 2017 and approved by Ronald H. Linden, Professor, Political Science Despina Alexiadou, Assistant Professor, Political Science John Markoff, Professor, Sociology Thesis Advisor: B. Guy Peters, Professor, Political Science ii Copyright © by Yasemin İrepoğlu Carreras 2017 iii DECENTRALIZATION, INTERACTIVE GOVERNANCE AND INCOME INEQUALITY: A COMPARATIVE STUDY Yasemin İrepoğlu Carreras, PhD University of Pittsburgh, 2017 This dissertation argues that decentralization leads to higher income inequality, and that interactive governance –the level of ‘shared-rule’ between central government, regional governments and social actors–, is associated with lower income inequality. I use a mixed- methods approach – combining a large-N quantitative analysis with in-depth studies of the cases of Spain, Germany, France and Sweden. In my quantitative study of 17 OECD countries, I find that in countries where subnational units have higher fiscal self-rule (higher fiscal decentralization), there is higher income inequality. Conversely, more shared fiscal rule between the subnational regions and the central government is significantly associated with less income inequality. This dissertation contributes to the literature on federalism, decentralization, governance and inequality in both theoretical and empirical ways. I disentangle the political, administrative and fiscal aspects of decentralization quantitatively, and I also explore different types of decentralization qualitatively with the elite interviews conducted in the four countries. Overall, the detailed case studies enable me to reflect on how the territorial governance structure impacts inequality both from a static and dynamic perspective. I complement my argument on how decentralization impacts inequality with how the interactions in governance can also add to or detract from decentralization’s effect on inequality. This work allows me to measure interactive governance by disaggregating it into its processes and outputs through looking at its iv intergovernmental and non-governmental aspects, which brings a new applied method to understanding and measuring governance. In my case studies, I demonstrate that Spain’s asymmetric fiscal decentralization; its low shared-rule and low interactive governance are significantly associated with its high level of income inequality. France’s symmetrical and centralized fiscal structure and its low decentralization are associated with its currently low inequality levels. Germany is a federal country, but its fiscal policies are strongly coordinated at the central level, which leads to low inequality levels. Sweden, as a unitary and a decentralized country, has high interactive governance and strong state coordination, which makes for a territorial governance structure conducive to lower income inequality. v TABLE OF CONTENTS PREFACE ................................................................................................................................... XX 1.0 INTRODUCTION: WHY INCOME INEQUALITY ............................................... 1 1.1 WHY STUDY TERRITORIAL GOVERNANCE AND INCOME INEQUALITY: THE IMPORTANCE OF THE QUESTION ......................................... 3 1.2 THE ARGUMENT IN BRIEF ........................................................................... 4 1.3 PLAN OF THE DISSERTATION ..................................................................... 5 2.0 DEFINING THE VARIABLES, RESEARCH DESIGN AND METHODOLOGY ………………………………………………………………………………………….7 2.1 DEFINING THE DEPENDENT VARIABLE: INCOME INEQUALITY .... 7 2.1.1 Defining income inequality........................................................................... 7 2.1.2 Market (gross) vs. net (disposable) income inequality .............................. 8 2.1.3 Defining regional inequality ....................................................................... 10 2.2 DEFINING THE INDEPENDENT VARIABLES (1): DECENTRALIZATION .................................................................................................... 10 2.2.1 Political decentralization ............................................................................ 15 2.2.2 Administrative decentralization ................................................................ 17 2.2.3 Fiscal decentralization ................................................................................ 18 vi 2.3 DEFINING THE INDEPENDENT VARIABLES (2): INTERACTIVE GOVERNANCE AND THE INTERACTIVE GOVERNANCE INDEX ..................... 19 2.3.1 Defining interactive governance ................................................................ 20 2.3.2 Interactive Governance Index: a tool for measurement ......................... 23 2.4 RESEARCH DESIGN, CASES AND METHODOLOGY ............................ 24 3.0 THEORY: HOW DO DECENTRALIZATION AND INTERACTIVE GOVERNANCE IMPACT INCOME INEQUALITY? .......................................................... 30 3.1 THE CAUSAL MECHANISMS OF THE THEORY .................................... 33 3.1.1 Federalism, decentralization and inequality: the causal mechanism ..... 33 3.1.2 Fiscal federalism, fiscal decentralization and inequality......................... 36 3.1.3 Decentralization, welfare state policies and inequality ........................... 39 3.2 SECOND PART OF THE THEORY: INTERACTIVE GOVERNANCE AND INCOME INEQUALITY ......................................................................................... 48 3.2.1 Intergovernmental relations and interactive governance, and inequality ………………………………………………………………………………50 3.2.2 Social actors and interactive governance and inequality ........................ 51 3.3 TESTABLE HYPOTHESES ............................................................................ 54 4.0 QUANTITATIVE STUDY ON DECENTRALIZATION AND INCOME INEQUALITY ............................................................................................................................. 57 4.1 DATA AND VARIABLES ................................................................................ 57 4.2 RESULTS OF THE QUANTITATIVE STUDY ............................................ 65 5.0 THE CASE OF SPAIN: ‘EVOLVING’ AND ‘ACCOMMODATION’ FEDERALISM? .......................................................................................................................... 71 vii 5.1 THE SHARING OF COMPETENCES BETWEEN DIFFERENT LEVELS AND POLITICAL DECENTRALIZATION ................................................................... 73 5.2 FISCAL AND ADMINISTRATIVE DECENTRALIZATION IN SPAIN .. 86 5.2.1 Different periods of the decentralization processes in Spain and quantitative indicators: Regional Authority Index ................................................. 87 5.3 EVOLUTION OF THE WELFARE STATE IN SPAIN ............................... 99 5.4 INEQUALITY TRENDS AND FISCAL AND SOCIAL POLICIES RELATED TO DECENTRALIZATION IN SPAIN .................................................... 102 5.4.1 Spain’s national inequality levels ............................................................ 102 5.4.2 Regional inequality in Spain: convergence or not? ............................... 107 5.4.3 Summary: matching inequality with different periods of decentralization ........................................................................................................ 114 5.4.4 Fiscal policies: autonomous community financing and redistributive policies………….. ..................................................................................................... 115 5.4.5 Taxes and financing for Autonomous Communities: fiscally federal or not?................... ......................................................................................................... 117 5.4.6 Social policies: health policies and minimum income schemes in Spain ……………………………………………………………………………..131 5.4.6.1 Health policy in Spain and inequality ............................................. 132 5.4.6.2 Minimum income policies in Spain and inequality ........................ 135 5.4.7 Summing up: decentralization of the welfare state and inequality in Spain…………… ...................................................................................................... 136 viii 5.5 INTERACTIVE GOVERNANCE IN SPAIN: INTERGOVERNMENTAL RELATIONS AND THE ROLES OF SOCIAL ACTORS .......................................... 138 5.5.1 Decentralization, intergovernmental relations and interactive governance in Spain ................................................................................................. 139 5.5.2 Vertical and horizontal coordination channels in intergovernmental relations: Sectoral Conferences .............................................................................. 143 5.5.3 Party politics in Spain and interactive governance ............................... 146 5.5.4 Spain and corporatism? Social actors and policy concertation: Bargaining procedures, interactive governance and implications
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