Interactive Governance Index and Territoral Inequalities

How does “interactive governance” help mitigate territorial economic inequalities in decentralized multilevel systems? In this paper, I use and build on the “interactive governance” concept, as defined by Torfing, Peters, Pierre and Sorensen (2012): “the complex process through which a plurality of social and political actors with diverging interests interact in order to formulate, promote and achieve common objectives by means of mobilizing, exchanging and deploying a range of ideas, rules and resources”. This paper is an attempt to create a novel index to measure and compare countries on their interactive governance levels to help us better understand factors that contribute to territorial economic inequalities. I argue that interactive governance can be used to offset regional and territorial economic inequalities arising from, especially the fiscal aspect of decentralization. Fiscal decentralization may hinder the ability of the central government to redistribute in a more standardized way through taxes and transfers and may allow for more discrepancies in fiscal capacities among regions. However, if countries have more interactive governance, they can overcome territorial economic inequalities even if they are – fiscally - decentralized. The Interactive Governance Index measures whether there are interactions between different governmental and nongovernmental actors at the local, regional, and central levels towards same redistributive goals - from a process and output perspective. From the process perspective, I measure how much each of the following exist: a) identifiable goals – concerning equality in tax capacities and social policy delivery, b) clear and observed rules of relationships between each subnational government and the central government (vertically), c) vertical interactions(mutual contingencies and interdependencies between different levels, d) horizontal interactions: Central government’s capacity to coordinate among its departments & interactions among different layers, e) relying on social partners and compromise, and f) harmonized and integrated policies at various levels. From the output perspective, I measure the level of a) goal attainment and distributional effects, b) institutionalization and dissemination of revenue collection with equalizing effects. I rank countries as low (0), medium (1), and high (2) on each of these aspects and calculate a total score for each of them. I argue that countries that rank higher on the Interactive Governance Index are expected to be associated with lower territorial economic inequalities. Using a typology, I compare two federal countries, Germany and Spain (de facto federal), and two unitary countries, France and Sweden. My findings lend support to my argument. Overall, the paper contributes to the literature of comparative political economy and economic geography by studying an under-explored relationship between decentralization, governance, and territorial inequality. Work cited: Torfing, Jacob, B. Guy Peters, Jon Pierre, and Eva Sorensen. 2012. Interactive Governance. Advancing the Paradigm. New York: Oxford University Press.