This paper is addressed to a major puzzle in the study of Latin American political economy: what type of institutional designs are necessary to avoid fiscal instability? The theoretical point of departure for this concern is that much of the existing research on the political economy of fiscal policies and market reforms focuses on international and national-level variables to explain the viability of such reforms and policy performance while omitting the role of subnational politics and the representational advantages and potential for opportunistic behaviour rendered by legislative malapportionment. To address this theoretical deficiency, this paper sets out to propose an analytical framework to explain the fiscal effects of legislative malapportionment in three Latin American federations: Argentina, Brazil, and Mexico, which are the countries experiencing high yet varying degrees of legislative malapportionment in the region. Fiscal instability is operationalized through two indicators: the regional allocation of intergovernmental transfers and levels of subnational indebtedness. Adding to its putative theoretical contribution, one common theme throughout this paper is that while institutions themselves become loci of political contestation, the hypothesized power asymmetries are not likely to disappear unless reforms of legislative apportionment take effect. Considering the multiplicity of entrenched interests hindering institutional reforms and thus in light of the apparent endurance of legislative overrepresentation, the failure to elaborate a systematic understanding of its effects has more than academic implications.
