COMPARATIVE POLITICAL STUDIES / May 2000 Remmer, Wibbels / POLITICS AND FISCAL PERFORMANCE IN ARGENTINA Existing research has failed to address the impact of subnational politics on economic adjust- ment. This article attempts to fill this gap by outlining theoretical reasons for anticipating policy divergences across levels of government and by offering three hypotheses to account for varia- tion at the subnational level. The authors explore these ideas on the basis of the Argentine experi- ence. The study traces the impact of subnational policy on Argentine economic adjustment and tests hypotheses about subnational policy variation on the basis of provincial fiscal data. The au- thors’ findings underline the importance of subnational policy choice for national performance and suggest a revised understanding of the role of political competition in the economic adjust- ment process. The authors find considerable evidence that interactions between party competi- tion and the structure of the public sector shape provincial fiscal performance and thereby condi- tion the capacity for economic adjustment at the national level. THE SUBNATIONAL POLITICS OF ECONOMIC ADJUSTMENT Provincial Politics and Fiscal Performance in Argentina KAREN L. REMMER ERIK WIBBELS University of New Mexico T he challenges posed by shifts in the global economy over the past two decades have generated widespread interest in the politics of economic adjustment. What political conditions facilitate economic reform? When do political leaders sacrifice macroeconomic stability to achieve political goals? What accounts for the varied ability of governments to respond effectively to shifting economic constraints and opportunities? A rapidly growing body of empirical research has provided us with a rich array of answers to these ques- tions (e.g., Grindle & Thomas, 1991; Haggard & Kaufman, 1995; Nelson, 1989, 1990; Pierson, 1994; Przeworski, 1991; Remmer, 1993; Waterbury, 419 AUTHORS’ NOTE: This research is based on work supported by the National Science Foundation under Grant SBR-9809211 and the Institute for Public Policy at the University of New Mexico. COMPARATIVE POLITICAL STUDIES, Vol. 33 No. 4, May 2000 419-451 © 2000 Sage Publications, Inc.