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The Effect of Direct Democracy on Income Redistribution: Evidence for Switzerland

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Author Info
Lars P. Feld
Justina A.V. Fischer
Gebhard Kirchgassner

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Abstract

There is an intensive dispute in political economics about the impact of institutions on income redistribution. While the main focus is on comparison between different forms of representative democracy, the influence of direct democracy on redistribution has attracted much less attention. According to theoretical arguments and previous empirical results, government policies of income redistribution are expected to be more in line with median voter preferences in direct than in representative democracies. In this paper, we find that institutions of direct democracy are associated with lower public spending and revenue, particularly lower welfare spending and broad-based income and property (wealth) tax revenue. Moreover, we estimate a model which explains the determinants of redistribution using panel data provided by the Swiss Federal Tax Office from 1981 to 1997 and a cross section of (representative) individual data from 1992. While our results indicate that less public funds are used to redistribute income and actual redistribution is lower, inequality is not reduced to a lesser extent in direct than in representative democracies for a given initial income distribution. This finding might well indicate the presence of efficiency gains in redistribution policies.

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Paper provided by Center for Research in Economics, Management and the Arts (CREMA) in its series CREMA Working Paper Series with number 2006-24.

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Date of creation: Oct 2006
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Handle: RePEc:cra:wpaper:2006-24

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Related research
Keywords: Income Redistribution; Direct Democracy; Referenda; Initiatives.;

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Find related papers by JEL classification:
D7 - Microeconomics - - Analysis of Collective Decision-Making
D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation
I30 - Health, Education, and Welfare - - Welfare and Poverty - - - General
H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Health, Education, and Welfare
H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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.:

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  3. Lars P. Feld & Gebhard Kirchgassner, 1999. "Public Debt and Budgetary Procedures: Top Down or Bottom Up? Some Evidence from Swiss Municipalities," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 151-180 National Bureau of Economic Research, Inc. [Downloadable!]
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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. Hans-Günter Krüsselberg, 2005. "Milton Friedman und der Wissenschaftliche Beirat für Familienfragen Elternkompetenz und Anteilscheine am Schulbudget – Gedanken über Reformpotenziale," Marburg Working Papers on Economics 200506, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung). [Downloadable!]
  2. Fischer, Justina A.V., 2007. "The Impact of Direct Democracy on Public Education: Evidence for Swiss Students in Reading, Mathematics and Natural Science," Working Paper Series in Economics and Finance 688, Stockholm School of Economics. [Downloadable!]
  3. David Dorn & Justina Fischer & Gebhard Kirchgässner & Alfonso Sousa-Poza, 2008. "Direct democracy and life satisfaction revisited: new evidence for Switzerland," Journal of Happiness Studies, Springer, vol. 9(2), pages 227-255, June. [Downloadable!] (restricted)
  4. Ruth Uwaifo Oyelere, 2007. "Within and Between Gender Disparities in Income and Education Benefits from Democracy," IZA Discussion Papers 3221, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Justina A.V. Fischer, 2005. "The Impact of Direct Democracy on Public Education: Performance of Swiss Students in Reading," University of St. Gallen Department of Economics working paper series 2005 2005-10, Department of Economics, University of St. Gallen. [Downloadable!]
  6. 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:
  7. Justina AV Fischer & Friedrich Schneider, 2008. "Protestantism and Government Spending: a Negative Relationship? An Empirical Application to Swiss Cantons," University of St. Gallen Department of Economics working paper series 2008 2008-03, Department of Economics, University of St. Gallen. [Downloadable!]
    Other versions:
  8. DAVID DORN & Justina Fischer & GEBHARD KIRCHGÄSSNER & ALFONSO SOUSA-POZA, 2005. "Is It Culture or Democracy? The Impact of Democracy, Income, and Culture on Happiness," University of St. Gallen Department of Economics working paper series 2005 2005-12, Department of Economics, University of St. Gallen. [Downloadable!]
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