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Fiscal Institutions at the Cantonal Level in Switzerland

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  • Kirchgässner, Gebhard

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Abstract

In this paper, institutions are described which are designed to reach sustainability of public finances in the Swiss cantons. These are on the one hand direct popular rights, the fiscal referendum in particular, which allow citizens to express their fiscal preferences. These are on the other hand debt breaks, i.e. institutions, which prevent expenditure and revenue from drifting apart too much in order to limit possible deficits. Both together, fiscal referenda and debt breaks, allow cantons to perform a sustainable fiscal policy. This also holds – and is particularly important – for those cantons that are financially weak. That these institutions are successful is not only demonstrated by descriptive analysis but also supported by econometric analyses. Moreover, they also reduce interest payments cantons have to bear for investment expenditure. Thus, with well-designed institutions federal states might even better be able to follow a sustainable fiscal policy than unitary ones.

Suggested Citation

  • Kirchgässner, Gebhard, 2013. "Fiscal Institutions at the Cantonal Level in Switzerland," Economics Working Paper Series 1304, University of St. Gallen, School of Economics and Political Science.
  • Handle: RePEc:usg:econwp:2013:04
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    File URL: http://ux-tauri.unisg.ch/RePEc/usg/econwp/EWP-1304.pdf
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    References listed on IDEAS

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    1. Matsusaka, John G, 2000. "Fiscal Effects of the Voter Initiative in the First Half of the Twentieth Century," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 619-650, October.
    2. Plümper, Thomas & Troeger, Vera E., 2007. "Efficient Estimation of Time-Invariant and Rarely Changing Variables in Finite Sample Panel Analyses with Unit Fixed Effects," Political Analysis, Cambridge University Press, vol. 15(2), pages 124-139, April.
    3. Signe Krogstrup & Sébastien Wälti, 2008. "Do fiscal rules cause budgetary outcomes?," Public Choice, Springer, vol. 136(1), pages 123-138, July.
    4. Lars P Feld & Gebhard Kirchgässner, 2001. "The political economy of direct legislation: direct democracy and local decision-making," Economic Policy, CEPR;CES;MSH, vol. 16(33), pages 329-367, October.
    5. Moessinger, Marc-Daniel & Feld, Lars P. & Kalb, Alexander & Osterloh, Steffen, 2013. "Sovereign Bond Market Reactions to Fiscal Rules and No-Bailout Clauses The Swiss Experience," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79807, Verein für Socialpolitik / German Economic Association.
    6. Christoph A. Schaltegger & René L. Frey, 2003. "Finanzausgleich und Föderalismus: Zur Neugestaltung der föderalen Finanzbeziehungen am Beispiel der Schweiz," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 4(2), pages 239-258, May.
    7. Helfried Bauer & Heinz Handler & Margit Schratzenstaller, 2006. "Finanzmanagement im föderalen Staat. Internationale und nationale Reformansätze," WIFO Studies, WIFO, number 27220, July.
    8. Thomas Romer & Howard Rosenthal, 1979. "Bureaucrats Versus Voters: On the Political Economy of Resource Allocation by Direct Democracy," The Quarterly Journal of Economics, Oxford University Press, vol. 93(4), pages 563-587.
    9. Matsusaka, John G, 1995. "Fiscal Effects of the Voter Initiative: Evidence from the Last 30 Years," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 587-623, June.
    10. Funk, Patricia & Gathmann, Christina, 2013. "Voter preferences, direct democracy and government spending," European Journal of Political Economy, Elsevier, vol. 32(C), pages 300-319.
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    Cited by:

    1. Klaus Gründler & Niklas Potrafke, 2020. "Fiscal Rules: Historical, Modern, and Sub-National Growth Effects," CESifo Working Paper Series 8305, CESifo.
    2. Baldi, Guido & Forster, Stephan, 2019. "Political Budget Cycles: Evidence from Swiss Cantons," EconStor Preprints 195930, ZBW - Leibniz Information Centre for Economics.
    3. Heiko T. Burret & Lars P. Feld, 2018. "Vertical effects of fiscal rules: the Swiss experience," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(3), pages 673-721, June.

    More about this item

    Keywords

    Sustainability; Public Debt; Fiscal Policy; Fiscal Referendum; Debt Brakes;

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing

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