The power and limits of federalism

Federalism has long been regarded as a powerful institutional solution to a variety of governance and social ills that plague politics in developed and developing countries alike. Since federalism is anchored within a country’s written constitution, it is hard to imagine an arena in which institutions might exert more predictable or enduring effects or would matter more in political and economic life. Yet, as this chapter will lay out, the expansive literature in economics and political science on federalism suggests two areas of ongoing research. First, it has come to surprisingly unsettled findings on the impact of federalism on the sorts of outcomes political scientists and economists normally study: fiscal discipline, inequality, and democracy. Second, how enduring federations come into existence in the first place remains a critical and not fully answered question, representing a promising avenue for ongoing research with important applied and theoretical implications.