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On Government Centralization and Budget Referendums: Evidence from Switzerland

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Author Info
Christoph A. Schaltegger
Lars Feld ()

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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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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 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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Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
H10 - Public Economics - - Structure and Scope of Government - - - General
H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. 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. [Downloadable!] (restricted)
  2. Persson, Torsten & Tabellini, Guido, 1994. "Does centralization increase the size of government?," European Economic Review, Elsevier, vol. 38(3-4), pages 765-773, April. [Downloadable!] (restricted)
  3. Redoano, Michela & Scharf, Kimberley Ann, 2002. "The Political Economy of Policy Centralization: Direct Versus Representative Democracy," CEPR Discussion Papers 3631, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. 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. [Downloadable!] (restricted)
  5. Panizza, Ugo, 1999. "On the determinants of fiscal centralization: Theory and evidence," Journal of Public Economics, Elsevier, vol. 74(1), pages 97-139, October. [Downloadable!] (restricted)
  6. Feld, Lars P. & Kirchgassner, Gebhard, 2001. "Income tax competition at the State and Local Level in Switzerland," Regional Science and Urban Economics, Elsevier, vol. 31(2-3), pages 181-213, April. [Downloadable!] (restricted)
    Other versions:
  7. 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. [Downloadable!] (restricted)
  8. Alesina, Alberto & Spolaore, Enrico, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1027-56, November.
    Other versions:
  9. 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. [Downloadable!] (restricted)
  10. Timothy Besley & Stephen Coate, 1999. "Centralized versus Decentralized Provision of Local Public Goods: A Political Economy Analysis," NBER Working Papers 7084, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. Lars P Feld & Friedrich Schneider, 2000. "State and local taxation," Economics working papers 2000-05, Department of Economics, Johannes Kepler University Linz, Austria. [Downloadable!]
  12. 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. [Downloadable!] (restricted)
  13. Baker, Samuel H, 2000. " Does Enhanced Veto Authority Centralize Government?," Public Choice, Springer, vol. 104(1-2), pages 63-79, July. [Downloadable!] (restricted)
  14. Lars P Feld & Gebhard Kirchgässner, 2001. "The political economy of direct legislation: direct democracy and local decision-making," Economic Policy, CEPR, CES, MSH, vol. 16(33), pages 329-367, October. [Downloadable!] (restricted)
  15. Lars P. Feld & John G. Matsusaka, 2000. "Budget Referendums and Government Spending: Evidence from Swiss," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Redoano, Michela & Scharf, Kimberley Ann, 2002. "The Political Economy of Policy Centralization: Direct Versus Representative Democracy," CEPR Discussion Papers 3631, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Lars P. Feld & Bruno S. Frey, 2004. "Illegal, Immoral, Fattening or What?: How Deterrence and Responsive Regulation Shape Tax Morale," Marburg Working Papers on Economics 200426, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung). [Downloadable!]
  3. Matthias Benz & Alois Stutzer:, . "Are Voters Better Informed When They Have a Larger Say in Politics? Evidence for the European Union and Switzerland," IEW - Working Papers iewwp119, Institute for Empirical Research in Economics - IEW. [Downloadable!]
    Other versions:
  4. Bruno S. Frey & Alois Stutzer, 2003. "Direct Democracy: Designing a Living Constitution," CREMA Working Paper Series 2003-05, Center for Research in Economics, Management and the Arts (CREMA). [Downloadable!]
    Other versions:
  5. Bruno S. Frey & Alois Stutzer, . "The Role of Direct Democracy and Federalism in Local Power," IEW - Working Papers iewwp209, Institute for Empirical Research in Economics - IEW. [Downloadable!]
    Other versions:
  6. Lars P. Feld & Christoph A. Schaltegger & Jan Schnellenbach, 2005. "On Government Centralization and Fiscal Referendums: A Theoretical Model and Evidence from Switzerland," CREMA Working Paper Series 2005-18, Center for Research in Economics, Management and the Arts (CREMA). [Downloadable!]
    Other versions:
  7. Benno Torgler & Christoph A. Schaltegger, 2005. "The Determinants of Political Discussion: How Important are Audit Courts and Local Autonomy?," CREMA Working Paper Series 2005-28, Center for Research in Economics, Management and the Arts (CREMA). [Downloadable!]
  8. Lars P. Feld & Gebhard Kirchgässner, 2004. "Sustainable Fiscal Policy in a Federal System: Switzerland as an Example," Marburg Working Papers on Economics 200424, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung). [Downloadable!]
    Other versions:
  9. Lars P. Feld & Gebhard Kirchgässner, 2004. "The Role of Direct Democracy in the European Union," Marburg Working Papers on Economics 200423, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung). [Downloadable!]
    Other versions:
  10. Bruno Frey & Lars Feld, 2002. "Deterrence and Morale in Taxation: An Empirical Analysis," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  11. Stegarescu, Dan, 2004. "Economic Integration and Fiscal Decentralization : Evidence from OECD Countries," ZEW Discussion Papers 04-86, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  12. Reiner Eichenberger & Mark Schelker, 2007. "Independent and competing agencies: An effective way to control government," Public Choice, Springer, vol. 130(1), pages 79-98, January. [Downloadable!] (restricted)
  13. Gebhard Kirchgässner, 2002. "Auswirkungen der direkten Demokratie auf die öffentlichen Finanzen: Empirische Ergebnisse für die Schweiz," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 138(IV), pages 411-426, December. [Downloadable!]
  14. Fischer, Justina AV, 2009. "Development of Direct Democracy in Swiss Cantons between 1997 and 2003," MPRA Paper 16140, University Library of Munich, Germany. [Downloadable!]
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