Politics, institutions, and fiscal performance in a federal system: an analysis of the Argentine provinces

We posit that the fiscal behavior of Argentine provinces is determined by a common pool game at two levels: within each province, and across political units. In the latter game, the national government has a greater incentive than the provincial governments to internalize the negative externality of fiscal imprudence. Given relatively strong party discipline, the president is able to induce governors from his party to internalize a portion of the externality to a greater extent than opposition governors. In Argentina "party matters" for fiscal behavior, but it does so for reasons different from those identified in studies of OECD countries. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification: C33; D72; H72; H77.