US Federalism and the Political Economy of Territorial Status: Evidence from Puerto Rico

How should we understand the uniquely ambiguous status of the unincorporated territories in the context of US federalism? Focusing on the case of Puerto Rico (PR), this article argues that its unique status stems from two distinct logics of governance: territorial differentiation in the socio-political realm versus integration in the economic space. In the socio-political realm, as well as in the area of taxation, the unincorporated territories remain “foreign to the United States in the domestic sense.” In contrast, these asymmetries do not fully apply to the realm of markets, as the free flow of goods, capital, and people between PR and the fifty states has been mostly guaranteed since the early twentieth century. The debt crisis of the twenty-first century shows how these two logics collided. The article concludes by outlining a research agenda on the political economy of unincorporated territories as part of the US federal system.