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On Government Centralization and Fiscal Referendums: A Theoretical Model and Evidence from Switzerland

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  • Lars P. Feld
  • Christoph A. Schaltegger
  • Jan Schnellenbach

Abstract

We propose and test a positive model of fiscal federalism in which centralization is less likely to occur in jurisdictions with referendum decisions on policy cen-tralization. Citizens choose centralization of public spending and revenue in order to internalize spillovers if individual preferences in two jurisdictions are suffi-ciently homogeneous. Under representative democracy, centralization is ineffi-ciently high because representatives can extract political rents by policy centrali-zation. Referendums thus restrict representatives? ability for rent extraction. An empirical analysis using a panel of Swiss cantons from 1980 to 1998 supports the hypothesis that centralization is less likely under referendum decision-making.

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Bibliographic Info

Paper provided by Center for Research in Economics, Management and the Arts (CREMA) in its series CREMA Working Paper Series with number 2005-18.

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Date of creation: Mar 2005
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Handle: RePEc:cra:wpaper:2005-18

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Keywords: Centralization; Fiscal Federalism; Fiscal Referendums;

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References

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Citations

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Cited by:
  1. Schaltegger, Christoph & Torgler, Benno, 2006. "Government Accountability and Fiscal Discipline: A panel analysis using Swiss data," Berkeley Olin Program in Law & Economics, Working Paper Series, Berkeley Olin Program in Law & Economics qt1jc275p2, Berkeley Olin Program in Law & Economics.
  2. Asatryan, Zareh & Baskaran, Thushyanthan & Grigoriadis, Theocharis & Heinemann, Friedrich, 2013. "Direct democracy and local public finances under cooperative federalism," ZEW Discussion Papers 13-038, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Patricia Funk & Christina Gathmann, 2009. "Does Direct Democracy Reduce the Size of Government? New Evidence from Historical Data, 1890-2000," CESifo Working Paper Series 2693, CESifo Group Munich.
  4. Benno Torgler & Christoph A. Schaltegger, 2005. "Trust and Fiscal Performance: A Panel Analysis with Swiss Data," Working Papers 2005.61, Fondazione Eni Enrico Mattei.
  5. Libman, Alexander Mikhailovich, 2009. "Эндогенные Границы И Распределение Власти В Федерациях И Международных Сообществах
    [ENDOGENOUS BOUNDARIES AND DISTRIBUTION OF POWER In the Federation]
    ," MPRA Paper 16473, University Library of Munich, Germany.

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