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On Government Centralization and Budget Referendums: Evidence from Switzerland

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Author Info

  • Christoph A. Schaltegger
  • Lars P. Feld

Abstract

Previous theoretical and empirical research has shown that policymakers have an incentive to centralize government activities in order to weaken the com-petitive pressure of fiscal federalism. We propose and test a positive model of fiscal federalism in which centralization is less likely to occur where budget referendums are possible. The reason for this result is that budget referendums reduce the extent to which pro-centralization regions can commit to a low level of spending delegating the centralization choice to elected poli-cymakers. In addition, it reduces the ability of higher level policy-makers to attract additional responsibilities in order to gain policy discretion. Empi-rical findings from a panel data analysis for Swiss cantons from 1980 to 1998 support this hypothesis.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 615.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_615

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Related research

Keywords: centralization; fiscal federalism; budget referendums;

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References

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  1. Brennan,Geoffrey & Buchanan,James M., 1980. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521233293, October.
  2. Baker, Samuel H, 2000. " Does Enhanced Veto Authority Centralize Government?," Public Choice, Springer, vol. 104(1-2), pages 63-79, July.
  3. Vaubel, Roland, 1994. " The Political Economy of Centralization and the European Community," Public Choice, Springer, vol. 81(1-2), pages 151-90, October.
  4. Besley, Timothy J. & Coate, Stephen, 2000. "Centralized versus Decentralized Provision of Local Public Goods: a Political Economy Analysis," CEPR Discussion Papers 2495, C.E.P.R. Discussion Papers.
  5. Myers, Gordon M., 1990. "Optimality, free mobility, and the regional authority in a federation," Journal of Public Economics, Elsevier, vol. 43(1), pages 107-121, October.
  6. Alberto Alesina & Enrico Spolaore, 1995. "On the Number and Size of Nations," NBER Working Papers 5050, National Bureau of Economic Research, Inc.
  7. Feld, Lars P. & Kirchgassner, Gebhard, 2000. "Direct democracy, political culture, and the outcome of economic policy: a report on the Swiss experience," European Journal of Political Economy, Elsevier, vol. 16(2), pages 287-306, June.
  8. Timothy Besley & Anne Case, 1992. "Incumbent Behavior: Vote Seeking, Tax Setting and Yardstick Competition," NBER Working Papers 4041, National Bureau of Economic Research, Inc.
  9. Bruno S. Frey & Alois Stutzer, . "Happiness, Economy and Institutions," IEW - Working Papers 015, Institute for Empirical Research in Economics - University of Zurich.
  10. Samuel Baker, 2000. "Does Enhanced Veto Authority Centralize Government?," Public Choice, Springer, vol. 104(1), pages 63-79, July.
  11. Pujol, Francesc & Weber, Luc, 2003. " Are Preferences for Fiscal Discipline Endogenous," Public Choice, Springer, vol. 114(3-4), pages 421-44, March.
  12. Lars P. Feld & John G. Matsusaka, 2000. "Budget Referendums and Government Spending: Evidence from Swiss," CESifo Working Paper Series 323, CESifo Group Munich.
  13. John Joseph Wallis & Wallace E. Oates, 1988. "Decentralization in the Public Sector: An Empirical Study of State and Local Government," NBER Chapters, in: Fiscal Federalism: Quantitative Studies, pages 5-32 National Bureau of Economic Research, Inc.
  14. Persson, Torsten & Tabellini, Guido, 1994. "Does centralization increase the size of government?," European Economic Review, Elsevier, vol. 38(3-4), pages 765-773, April.
  15. Gebhard Kirchgässner, 2010. "Direkte Demokratie," CREMA Working Paper Series 2010-16, Center for Research in Economics, Management and the Arts (CREMA).
  16. Weingast, Barry R & Shepsle, Kenneth A & Johnsen, Christopher, 1981. "The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 642-64, August.
  17. Charles Blankart, 2000. "The Process of Government Centralization: A Constitutional View," Constitutional Political Economy, Springer, vol. 11(1), pages 27-39, March.
  18. Feld, Lars P., 1997. "Exit, voice and income taxes: The loyalty of voters," European Journal of Political Economy, Elsevier, vol. 13(3), pages 455-478, September.
  19. Feld, Lars P, 2000. " Tax Competition and Income Redistribution: An Empirical Analysis for Switzerland," Public Choice, Springer, vol. 105(1-2), pages 125-64, October.
  20. Panizza, Ugo, 1999. "On the determinants of fiscal centralization: Theory and evidence," Journal of Public Economics, Elsevier, vol. 74(1), pages 97-139, October.
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