Abstract
Differentiation is an inherent trait of federal systems which largely explains the difficulty in coining a universally accepted definition of federalism. In other words, there are as many models of federalism as there are federal states, since each has its own distinctive characteristics that differentiate them from other federal peers. If we move the viewpoint inside the federal state, then, wide discrepancies emerge also between the different subnational units that compose it. Despite each subnational entity has (more or less) the same powers than its federation partners, inter-territorial economic disparities exist, these being particularly relevant as they frequently exacerbate dormant tensions and intergovernmental conflicts. This is because decentralization sometimes has a cost in terms of economic efficiency: divergences among subunits lead to different financial capacities (e.g. some regions are richer than others, have natural resources, etc.) and to different costs when providing public services - due to geography, demographics or any other circumstances -.
Against this background, equalization mechanisms are frequently set up with the purpose of reducing the economic divide and avoiding intergovernmental conflicts. Thus, these mechanisms are envisaged to bridge this gap (the so-called horizontal imbalance), by reducing disparities among subunits and as such achieving a certain degree of horizontal equity. Equalization can, thus, be described as a transfer of fiscal resources across jurisdictions with the aim of offsetting differences in revenue raising capacity or public service cost (Blöchliger et al. 2007). Therefore, the main objective of equalization is to -theoretically- allow subunits to provide a comparable level of services at similar levels of taxation. The extent to which this occurs varies greatly from one case to another as equalization relates to the value that each society gives to horizontal equity, not only in terms of equality among all citizens but also among the subunits that integrate the country.
Further, equalization mechanisms are controversial by their own nature as in most cases they pit the richer and the poorer subnational entities against each other in a zero-sum game, which impacts the degree of acceptance of the system. The latter is another factor that varies to a great extent from one case to another. This however has not prevented equalization programs from being a common feature in federal states and a necessary counterpart to decentralization (Boadway 2004), with the notable exceptions of the USA and Mexico (Watts 2008).
Against this background, the paper is meant to investigate whether subnational participation might be considered as one of the determinants of these dynamics. To do so the concept of ‘successful equalization’ is introduced and developed (sec. 2) and a selection of ‘equalization related contestations’ on a country-base are illustrated (sec. 3). This is done building on the concept of ‘contestatory federalism’ and adapting it to the nature and function of equalization. Finally, the selected systems are scrutinized with a focus on the rules that design and govern the different systems of equalization, having regard to the institutional actors and the decision-making procedures with the aim to assess how and to what extent subnational governments participate in making equalization-related decisions (sec. 4).