Fiscal Decentralization, Institutional Capacity, and Territorial Innovation:A Conditional Enabling Analytical Model for the Chilean Case and the Latin American Debate
DOI:
https://doi.org/10.22370/pe.2026.20.5811Keywords:
fiscal decentralization, fiscal federalism, territorial innovation, multilevel governance, subnational state capacity, strategic complementarity, Chile, Latin AmericaAbstract
This theoretical article develops an analytical framework to understand the heterogeneous effects of fiscal decentralization on territorial innovation in contexts of uneven institutional capacity, with specific reference to the Chilean case and the broader Latin American debate. Starting from the Chilean paradox—a state with comparatively high governance indicators but only 14.9% of subnational public spending against the OECD average of 28.8% (DIPRES, 2023; OECD, 2023)—the work integrates three theoretical traditions: fiscal federalism (Oates, Tiebout, Musgrave), multilevel governance (Hooghe and Marks), and the economics of regional innovation systems (Cooke, Camagni and Capello, Mazzucato). On this basis, the article formulates the Conditional Enabling Model of Territorial Innovation (CEMTI), positing that fiscal decentralization operates as an enabling—not determining—condition of territorial innovation, whose effectiveness depends on the interaction between subnational financial autonomy and institutional articulation. The distinctive conceptual contribution is the mathematical formalization of the fiscal amplification effect as strategic complementarity, with explicit derivation of a critical threshold of fiscal autonomy below which institutional articulation loses transformative efficacy. The Valparaíso Region—with Viña del Mar, San Antonio, and Quillota as contrasting configurations—is used as an illustrative analytical case, drawing on verifiable secondary evidence (SINIM, Central Bank, INE, ICVU). The article concludes by discussing Law No. 21,591 of Mining Royalty (2023) as an ongoing quasi-natural experiment that will enable empirical testing of the model, and proposes a roadmap for its validation.
Keywords: fiscal decentralization; fiscal federalism; territorial innovation; multilevel governance; subnational state capacity; strategic complementarity; Chile; Latin America.
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