Coalition Building Strategies and Transfer Dependence in Mexico`s Federalism.

This paper explores Mexican fiscal federalism from the point of view of legislative coalition building. In federal regimes legislators are constrained by their state affiliations. In order to evaluate the coalition formation strategies available to states, the paper analyzes minimal winning coalitions (MWC) of state delegations in the Mexican Chamber of Deputies. Banzhaf indexes of political power are calculated for each state. Players in this cooperative game are connected through their partisanship at the state level and the structural differences characterizing the states they belong to. Hence, the paper calculates connected minimal winning coalitions (CMWC) of state-party groups ranked according to their substantive disagreements on the reform of intergovernmental relations. The analysis of CMWC suggests that although coalition formation will be difficult, given the high degree of party discipline in the legislature, a reform of fiscal federalism in Mexico is possible. However, such reform can lead either to a highly redistributive system, which would further reinforce the vertical imbalances of the current arrangement; or a greater devolution of tax authority benefiting rich states, which would further enhance regional inequality. [ABSTRACT FROM AUTHOR]