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Fiscal Equalization, Tiebout Competition, and Incentives for Efficiency in a Federalist Country

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  • Philippe Widmer

    ()
    (Department of Economics, University of Zurich, Zurich, Switzerland)

  • Peter Zweifel

    (Department of Economics, University of Zurich, Zurich, Switzerland)

Abstract

The purpose of this article is twofold. First, it measures the efficiency in the provision of public goods by local jurisdictions applying data envelopment analysis (DEA). Second, it relates efficiency scores to a fiscal equalization scheme designed to mitigate the negative consequences of Tiebout competition. The data come from the twenty-six cantons of Switzerland (2000–2004), a country characterized by marked federalism. Results show the equalization scheme to indeed have a negative influence on performance, resulting in an efficiency–equity trade-off. However, substitution of earmarked payments by lump-sum payments as part of the 2008 reform is likely to enhance cantonal performance.

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Bibliographic Info

Article provided by in its journal Public Finance Review.

Volume (Year): 40 (2012)
Issue (Month): 1 (January)
Pages: 3-29

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Handle: RePEc:sae:pubfin:v:40:y:2012:i:1:p:3-29

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Related research

Keywords: DEA; efficiency measurement; federalism; fiscal equalization; public finance; Switzerland; Tiebout competition;

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Cited by:
  1. Philippe K. Widmer & George Elias & Peter Zweifel, 2012. "Improving efficiency through consolidation of jurisdictions? Evidence from the cantons of Switzerland," ECON - Working Papers 085, Department of Economics - University of Zurich.
  2. Geys, Benny & Vermeir, Jan, 2012. "Party cues in elections under multilevel governance: Theory and evidence from US states," Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" SP II 2012-107, Social Science Research Center Berlin (WZB).
  3. Luca Crivelli & Paola Salari, 2012. "Fiscal federalism and income redistribution through healthcare financing: An empirical analysis for the Swiss cantons," CEPRA working paper 1204, USI Università della Svizzera italiana.

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