This Doctoral Dissertation Research Support project analyzes the impact of political federalism upon the capacity for national economic adjustment in emerging market and developing nations. Existing literature has emphasized the national level political dynamics shaping adjustment efforts, largely ignoring the complicated relationship between market-oriented reform and the decentralization of political and fiscal power inherent in federal political systems. In contrast, the research has as its central point of theoretical departure the potentially negative consequences of the territorial division of political power for economic adjustment to the globalization of production and financial markets. The central hypothesis guiding the research is that the capacity for economic stabilization and adjustment decreases with the divergence of political interests across different levels of government within nations. A number of specific hypotheses are developed to answer whether or not nations with federal arrangements adjust less successfully than centralized nations, what institutional incentives across federal systems encourage successful adjustment, and what factors influence the capacity of individual states to adjust within federal nations. These questions will be addressed in a broad comparative framework that incorporates statistical and field research methods.
