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Trust and Fiscal Performance: A Panel Analysis with Swiss Data

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  • Benno Torgler

    (Yale Center for International and Area Studies)

  • Christoph A. Schaltegger

    (Swiss Federal Tax Administration University of St. Gallen and CREMA, Center for Research in Economics, Management and the Arts)

Abstract

Citizens are willing to abandon their short-term financial interest in free-riding considerably, if governments act in their interest, if procedures of the public decisions-making process are felt to be fair and if other fellow-citizens have to contribute also an adequate share to the community. In such a situation trustworthiness of a government and trust in a government is high. This paper provides empirical evidence that trust is crucial for fiscal performance using data for the full sample of Swiss cantons over the 1981-2001 period. In cantons with high levels of trust, the level of indebtedness is significantly lower. Trust supports fiscal discipline. In order to get a useful approximation for mutual trust among citizens and between citizens and their representatives, we use information from direct voter participation on political issues (initiatives and public referenda) held in Swiss state (cantonal) governments. Electoral support of government proposals reveals an important aspect of trust in a real world setting. Hence, our trust variable measures the behavior at the ballots thereby reducing possible subjective biases derived from surveys and questionnaires.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2005.61.

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Date of creation: May 2005
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Handle: RePEc:fem:femwpa:2005.61

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Keywords: Trust; Social capital; Fiscal performance; Indebtedness;

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Cited by:
  1. Justina AV Fischer & Antonio Rodriguez-Andrés, 2008. "Political institutions and suicide: A regional analysis of Switzerland," TWI Research Paper Series 33, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
  2. Justina A.V. Fischer & Benno Torgler, 2006. "Does Envy Destroy Social Fundamentals? The Impact of Relative Income Position on Social Capital," CREMA Working Paper Series 2006-04, Center for Research in Economics, Management and the Arts (CREMA).
  3. Gaetano Lisi, 2012. "Macroeconomic implications of the dynamics between power and trust: a theoretical formalisation of the ‘slippery slope’ framework," Discussion Papers in Economic Behaviour 1012, University of Valencia, ERI-CES.
  4. Pedro L. Rodríguez, José R. Morales, Fancisco J. Monaldi, 2012. "Direct Distribution of Oil Revenues in Venezuela: A Viable Alternative?," Working Papers 306, Center for Global Development.
  5. Justina A.V. Fischer & Benno Torgler, 2006. "The Effect of Relative Income Position on Social Capital," Economics Bulletin, AccessEcon, vol. 26(4), pages 1-20.
  6. repec:ebl:ecbull:v:26:y:2006:i:4:p:1-20 is not listed on IDEAS

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