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Do Large Cabinets Favor Large Governments? Evidence from Swiss Sub-federal Jurisdictions

  • Christoph A. Schaltegger
  • Lars P. Feld

The fiscal commons problem is one of the most prominent explanations of excessive spending and indebtedness in political economics. The more fragmented a government, the higher its spending, deficits and debt. In this paper we investigate to what extent this problem can be miti-gated by different fiscal or constitutional institutions. We distinguish between two variants of fragmented governments: cabinet size and coalition size. Theoretically, they both describe the degree to which the costs of spending decisions are internalized by individual decision-makers. In addition, we evaluate whether constitutional rules for executive and legislation as well as budget rules shape the size of government and how the different rules interact with fragmentation in de-termining government size. The empirical study of the role of fragmented governments for fiscal policy outcomes is based on a panel of the 26 Swiss cantons over the 1980-1998 period. The re-sults indicate that the number of ministers in the cabinet is negatively associated with fiscal disci-pline. Furthermore, the fiscal referendum does effectively restrict the fiscal commons problem, but less successfully than the budget rule.

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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 2004-15.

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Date of creation: Jul 2004
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Handle: RePEc:cra:wpaper:2004-15
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