Exit, Voice, and Mimicking Behavior: Evidence from Swiss Cantons
Previous empirical literature has shown that in order to overcome agency problems voters make inter-jurisdictional comparisons of fiscal performance when making electoral decisions. Incumbents therefore anticipate voters' feedback by copying fiscal policy decisions from neighbors. This paper argues that fiscal autonomy (exit) as well as direct legislation (voice) enrich political competition, reducing thus the influence of electoral competition on fiscal decisions. Consequently, policy mimicking does not matter in circumstances of direct legislation and fiscal autonomy where the impact of voters on the political agenda is particularly strong. Based on panel data between 1980 and 1998 we find encouraging evidence supporting our theoretical arguments. Copyright 2002 by Kluwer Academic Publishers
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