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Risk sharing, regional stabilization, and redistribution: the role of fiscal mechanisms in Switzerland
[Fiscal flows and financial markets: to what extent do they provide risk sharing within Sweden?]

Author

Listed:
  • Lars P Feld
  • Christoph A Schaltegger
  • Janine Studerus

Abstract

This paper analyses the importance of fiscal mechanisms for regional stabilization and redistribution in Switzerland. Switzerland is particularly interesting in this context because it features both a high level of fiscal autonomy for Swiss cantons, and explicit fiscal transfers between the federal government and the cantons. Based on a panel data analysis, we study the redistributive and stabilizing properties of fiscal equalization transfers, federal government transfers in general, direct federal taxation, the unemployment insurance scheme, and the first pillar pension scheme. We find a combined redistributive effect of these mechanisms of about 20%. This means that long-run income differentials of 1 Swiss franc between cantons translate into differences of long-run disposable income after taxes and transfers of about 80 cents. The combined contemporary stabilization effect with respect to short-term income fluctuations amounts, at best, to 10%, which is a small effect compared to previous findings for other countries.

Suggested Citation

  • Lars P Feld & Christoph A Schaltegger & Janine Studerus, 2021. "Risk sharing, regional stabilization, and redistribution: the role of fiscal mechanisms in Switzerland [Fiscal flows and financial markets: to what extent do they provide risk sharing within Sweden," Oxford Economic Papers, Oxford University Press, vol. 73(2), pages 601-622.
    • Handle: RePEc:oup:oxecpp:v:73:y:2021:i:2:p:601-622.
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    File URL: http://hdl.handle.net/10.1093/oep/gpaa036
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    More about this item

    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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