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Abstract:
This paper surveys the empirical research on fiscal institutions of the last three decades. The main results are: (i) Constitutional or statutory fiscal limitations have in most cases proved to be effective in cutting down public expenditure, revenue, and debt. (ii) Budgetary procedures matter as well. They might be less effective than constitutional or statutory rules, but in a situation where it is impossible to introduce such rules they might present a feasible second-best way to reach fiscal sustainability. (iii) Citizens demand fewer public services and a sounder fiscal policy in systems with direct legislation than in purely parliamentary systems. (iv) There is some evidence that fiscal federalism leads "ceteris paribus" to a smaller size of the government. There are also political institutions which have an impact on the public budgets, and there are some interactions between the different institutions.

Balanced Budget, Budgetary Procedures, Fiscal Federalism, Direct Democracy, Public Expenditure, Public Debt

Abstract:
After a short description of the economic model of behaviour first the weak rationality assumption in this model is discussed. As the assumption of self-interest is often seen to be an integral part of the economic model, we also discuss this assumption and its role in economic theorising. Then the two central normative rationality concepts of economics are discussed, which are both based on the Pareto principle: static and dynamic efficiency. It is shown that objections against this approach are hardly convincing. We conclude with some remarks on the relation between economic, legal and political rationality.

Abstract:
In the past there was hardly any use of economic instruments in environmental policy, mainly command and control measures were used. More recently, ecological taxes as well as tradable permits became more popular and voluntary agreements have been implemented. Using the Public Choice approach we ask for the reasons of this wider acceptance of economic instruments. We conclude that the use of market based instruments in environmental policy has not increased very much and their impact on the actual situation is still rather low, but there is hope of at least some increase in the future.

Environmental Policy, Ecological Taxes, Tradable Permits, Voluntary Agreements, Voting Behaviour, Public Bureaucracy, Interest Groups

Abstract:
What are the conditions under which a moral justification of taxation is possible? This question does not only interest philosophers and economists from a scientific point of view, but it can have considerable practical relevance as well because the willingness of citizens to pay taxes may depend upon whether they consider taxation as being morally justified or not. This paper attempts to give some answers on the question what these conditions are. First, reporting results of an empirical study the impact of tax morale on tax evasion is demonstrated. After this, some (philosophical) considerations are presented concerning the moral justification of taxation, i.e. it is asked when we might speak of a moral obligation to pay taxes. Then, we consider some papers which ask for institutional factors that may have an impact on tax morale. We finish with some remarks about possibilities to raise tax morale.

tax morale, tax evasion, principles of taxation, trust, direct democracy, federalism

Abstract:
First, the problem of defining the government size and theoretical considerations about the relation between this size and economic growth are discussed. Then the international comparative empirical literature as well as the one discussing the Swiss situation are reviewed. Neither of them comes to firm conclusions. One reason for this is that in international cross-section as well as panel analyses the simultaneity problem is extremely tricky. Moreover, these papers do not take into account institutional differences between the countries. On the other hand, studies which look at the federal unit within one national state and, therefore, avoid the latter problem, are faced with an even more serious simultaneity problem.

Economic Growth, Government Size, Switzerland

Abstract:
Because it is possible to find for any political position economists who defend it (for money), economists giving policy advice are in the general public often accused of being corruptible. The purpose of this paper is to show that nevertheless it is possible that the process of policy advice leads to objective knowledge. We ask for the role of the scientist in this process. This is done on the basis of critical rationalism. Then it is shown that economic theory is so weak that it is possible for different economists to defend pretty contrary positions with the claim of scientific truth. Consequently, a precondition for reaching objectivity is an open public discussion.

Abstract:
In this paper, the introduction of direct-democratic decision-making in all EU decisions is considered when it is feasible without prohibitively increasing decision-making costs. We start with the contractarian argument that each constitution is a contract joining the citizens of a state and requires as such the explicit agreement of (a majority of) citizens. Thus, the future European Constitution as well as future changes of it should be decided by the European citizens. After a discussion of the pros and cons of direct democracy, the ability of direct democracy to help creating a European demos is discussed. Consequently, we propose a mandatory (required and binding) referendum on total and partial revisions of the European Constitution. In addition, we propose a constitutional initiative, a statutory and a general initiative as well as a fiscal referendum for financially important projects.

direct democracy, referenda, initiatives

Abstract:
According to the Leviathan-Model, fiscal federalism is seen as a binding constraint on a revenue-maximizing government. The competitive pressure of fiscal federalism is supposed to reduce public sector size as compared to unitary states. However, empirical results concerning the Leviathan hypothesis are mixed. This study uses a state and local-level panel data set of Swiss cantons from 1980 to 1998 to empirically analyze the effect of different federalist institutions on the size and structure of government revenue. Because of the considerable tax autonomy of sub-national Swiss governments, it is possible to investigate different mechanisms by which fiscal federalism may influence government size. The results indicate that tax exporting has a revenue expanding effect whereas tax competition favors a smaller size of government. Fragmentation has essentially no effect on the size of government revenue for Swiss cantons. The overall effect of revenue decentralization leads to lower tax revenue but higher user charges. Thus, revenue decentralization favors a smaller size of government revenue and shifts government revenue from taxes to user charges.

federalism, government revenue, tax competition, tax exporting.

Abstract:
After presenting some casual evidence about the difference between economists and the rest of the population, first the survey and experimental evidence which has been presented on this topic during the last 20 years is discussed. But can these results really be transferred to real world situations? To show this, examples of referenda results in Switzerland are presented where the citizens decided against recommendations of most economists. But what is so particular in economic theory that causes these different convictions? Some explanations are given with respect to positive economic theory and with respect to the normative convictions of economists. The paper concludes with possible consequences which economists might
draw.

Cooperative Behaviour, Indoctrination, Self-Selection, Referenda Results, Economic Model of Behaviour, Commitment, Fairness of the Market

Abstract:
Are political outcomes in democratic systems with referenda and initiatives stronger related to the preferences of the individual citizens than in purely representative systems? After present-ing the theoretical arguments related to the functioning and efficiency of initiatives and refer-enda, this paper surveys the results of empirical studies about the economic impact of direct democratic rules, especially on public fiscal policy, the efficiency of publicly provided goods, and gross domestic income. We also consider papers about the impact of tax payer revolts and about single referenda on different governmental levels. Over all, it is shown that the individ-ual preferences have a stronger impact in a direct democracy than in a purely representative system.

Abstract:
The weak rationality principle is not an empirical statement but a heuristic rule of how to proceed in social sciences. It is a necessary ingredient of any "understanding" social science in the Weberian sense. In this paper, first this principle and its role in economic theorizing is discussed. It is also explained why it makes sense to use a micro-foundation and, therefore, employ the rationality assumption in economic models. Then, with reference to the "bounded rationality" approach, the informational assumptions are discussed. Third, we address the assumption of self-interest which is often seen as a part of the rationality assumption. We conclude with some remarks on handling the problems of "free will" as well as "weakness of the will" within the economic approach.

Rationality, Self Interest, Micro-Foundation, Bounded Rationality

Abstract:
The impact of corporate income taxes on location decisions of firms is widely debated in the tax competition literature. Tax rate differences across jurisdictions may lead to distortions of firms' investment decisions. Empirical evidence on tax induced relocation and subsequent economic development in the U.S. and Europe is still inconclusive. Much the same applies to Switzerland. While there is some evidence on personal income tax competition between Swiss cantons, evidence on the impact of intercantonal corporate income tax differences on the location of business within Switzerland is missing. In this paper, we present econometric evidence on the influence of corporate and personal income taxes on the regional distribution of firms in 1981 and 1991 and on cantonal employment using a panel data set of the 26 Swiss cantons from 1985 to 1997. The results show that corporate and personal income taxes deter firms to locate in a canton and subsequently reduce cantonal employment.

Corporate Income Taxes, Personal Income Taxes, Tax Competition, Business Location

Abstract:
Tax competition is supposed to lead to inefficiencies in the provision of public goods and difficulties for decentralized redistribution. A necessary condition for these effects to occur is that residence and location decisions are determined by fiscal considerations. In this paper, the impact of personal income taxes and transfer payments on residence decisions of taxpayers is analyzed using cross sectional data on the distribution of different groups of taxpayers in different income groups among the 26 Swiss cantons and the 137 largest Swiss cities. We find that tax competition with respect to personal income taxes is relatively strong in Switzerland.

Abstract:
Using quarterly data for the Federal Republic of Germany, we generate four-quarter-ahead forecasts for real GDP growth. Throughout the seventies and eighties, real M1 is still the best predictor. It clearly outperforms interest rate-based forecasts, and within this group short-run interest rates outperform interest rate spreads. The same holds for the development after 1992. Thus, there are other measures of monetary policy which predict real GDP growth better than the spread. On the other hand, simple forecasts based on M1 or on short-run interest rates outperform those of the leading German research institutes.

Abstract:
We look at the relation between democracy and perceived subjective well-being, taking also into account the impact of income and culture. After briefly reviewing the empirical results for Switzerland, we re-estimate this relationship allowing for the relative income position of individuals and also using a new more recent data from the Swiss Household Panel. No robust relationship between the extent of (direct) democracy and happiness can be observed. In a second step, we conduct a cross-national analysis, covering 28 countries with data from the 1998 International Social Survey Programme (ISSP). There we observe a robust positive and significant relationship between democracy and happiness.

Culture, democracy, direct democracy, happiness, institutions, utility

Abstract:
Using Swiss data from 1983 to 1996, we first use the approach developed by MISHKIN and are able to reproduce very similar results for Switzerland. However, these results are extremely unstable, once further variables are introduced in the equations. After checking for the order of integration we use cointegration methods and show that in nearly all cases the hypotheses behind the MISHKIN approach have to be rejected. Thus, this approach can hardly be used to predict future Swiss inflation. Moreover, the apparently successful application of this approach depends more on the negative correlation between short-term interest and long-term inflation rates than on a positive correlation between long-term interest and inflation rates.

Abstract:
In this paper the approach of Constitutional Economics is presented and some of its applications are shown. First, the concept of the original position (constitutional convention) with its informational restrictions and the unanimity rule are discussed. Next, the exchange paradigm which lies behind the whole approach and the role of the self-interest assumption are discussed. Then it is asked for the value judgments which have to be accepted whenever this approach is to be applied to problems of real constitutions. Finally, we show applications of this approach to problems of public debt, taxation, fiscal federalism as well as the tension between liberalism and democracy as organising principles of a modern society.

Constitutional Contractarianism, Original Position, Veil of Ignorance, Self-Interest, Value Judgments, Public Debt, Taxation, Fischal Federalism, Liberalism, Democracy

Abstract:
Using an applied general equilibrium of the Swiss economy the economic consequences of an environmental tax reform are analysed. Such a reform is followed by a substantial reduction of CO2 emissions and the use of non-renewable energy (first dividend), and a reduction of involuntary unemployment. The existence of this second dividend depends, however, on the strategy followed by trade unions. These results are compared with the results of models with voluntary employment, with an energy tax rather than a CO2 tax, and a model where the three most energy intensive sectors are exempted from paying the CO2 tax.

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.

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.

income redistribution, direct democracy, referenda, initiatives

Abstract:
First, a brief sketch of the economic tasks government has to perform are given, before three issues are discussed in more detail: Public production, competition policy, and government interventions in Corporate Governance. These three issues are of particular political relevance in Switzerland, partly because the Swiss citizens clearly expressed in referenda that they prefer a larger role of the government in these areas than most economists recommend. Finally, we discuss two developments which have shifted the perspective by which the role of the government is viewed: The increasing internationalisation of economic policy and the role of intermediary institutions between the state and the market.

Public Production, Competition Policy, Regulation, Corporate Governance

Abstract:
How a sustainable fiscal policy can be performed in a federal system is not only a Swiss problem but is also discussed in other federal countries like Germany and Austria, and in the European Union. Contrary to most other countries, the Swiss Fiscal system is characterised by an extensive fiscal federalism with high fiscal autonomy at all governmental levels, by direct popular rights which include fiscal referenda at the cantonal and local levels, and by particular constitutional and/or statutory fiscal restraints in order to prevent excessive public debt. In this paper, the effects of these constitutional clauses on public finances are investigated. Using a panel of the 26 Swiss cantons from 1980 to 1998, we provide evidence that direct democracy leads to significantly lower expenditure and revenue. The fiscal constraint, on the other hand, significantly reduces budget deficits. Total, cantonal as well as local expenditure and revenue are the lower the higher the share of local expenditure is.

Direct Democracy, Referenda, Initiatives

Abstract:
After discussing various approaches about heroic behaviour in the literature, we first give a definition and classification of moral behaviour, in distinction to intrinsically motivated and 'prudent' behaviour. Then, we present some arguments on the function of moral behaviour according to 'minimal' standards of the average individual in a modern democratic society, before we turn to heroic behaviour. We conclude with some remarks on methodological as well as social problems which arise or may arise if behaviour can not be influenced by extrinsic incentives.

Moral Behaviour, Intrinsic Motivation, Voluntary Contribution to Public Goods, Asymmetric Information

Abstract:
We examine whether Swiss federal fiscal policy was sustainable over the period from 1900 to 2002. We perform unit root and cointegration tests for federal revenues and expenditures, taking into account a structural shift in the budgetary process related to World War II. We find sustainability over the entire period. However, splitting the sample into two sub-samples before and after World War II, the results do much less support sustainability. Finally, applying the tax smoothing model of BARRO (1979), we show that cyclical fluctuations of the output and changes in expected inflation rate are major determinants of the federal budget deficit over the time period considered.

sustainability, budget deficit, cointegration, structural breaks

Abstract:
After a short description of the German Council of Economic Experts' proposals for labor market reforms we begin by a discussion of the expected consequences of a policy following these proposals. There, we consider not only the direct impact on the labor market, but also social side effects which are to be expected. Then we ask for the (possible) reasons why employer organizations and trade unions, but also political parties did not follow these proposals or at least not to the extent the Council hoped. Finally, the political role of the Council is investigated, and some suggestions are made how it may be possible that its proposal have a stronger political impact in the future.

Labor Market Reform, Economic Policy Advice

Abstract:
The basic idea behind this paper is that voters have to be able to distinguish the positions of the parties. Following Weber's Law this depends on the relative distance with respect to their own optimal position. Using such a measure a model of voter participation is developed which allows for abstention because of indifference as well as alienation. Two variants of this model are applied on a two parties contest: One where participation is proportional to the relative distance and another one where voters participate if this distance is above a certain convergence to the median voter's position.

Voting Behaviour, Abstention, Perception of Differences, Party Competition

Abstract:
Starting from a non-cognitivist position, it is asked whether it makes sense (i) to claim a right to work as a basic human right which should be written into the constitution, (ii) to decree a general reduction of working time, and (iii) to grant a basic income to everybody without any additional qualifications. It is shown that all three demands are to be rejected, at least in the radical formulation in which they are often proclaimed: they either can not be realized at all or at least not in a way which would not impair other basic human rights. Finally, it is asked which policy measures could be undertaken to meet the intentions of these claims.

Abstract:
Using data of Swiss referenda from 1981 to 1999, this paper presents new empirical results which allow us to discriminate better between the decision and mobilisation hypotheses of electoral participation. First, theoretical considerations which lead to these hypotheses are presented as well as the theory of expressive voting, and a survey of the available empirical evidence is given. Then, we describe the empirical approach before we come to its results. Those are much in line with the mobilisation but do not support the decision hypothesis. They are, however, also only partly compatible with the theory of expressive voting.

expected closeness, expressive voting, campaign expenditure, turnout, direct democracy

Abstract:
First, theoretical considerations and selected empirical results of previous studies explaining participation in elections and referenda are presented. We consider the decision hypothesis, the mobilisation hypothesis, the expressive voting approach as well as two hypotheses which have been developed by political scientists. To test these hypotheses, we use data of Swiss referenda and initiatives from 1981 to 1999. The empirical results strongly support the mobilisation but not the decision hypothesis. That the expected financial consequences of a proposal have an impact on the turnout of optional referenda but not of initiatives is at least somewhat at odds with the expressive voting approach.

Expected Closeness, Expressive Voting, Campaign Expenditure, Turnout, Direct Democracy

Abstract:
Using Allensbach survey data about how people look forward to the coming year, we construct true ex post-forecasts and compare them with the forecasts produced by the German Council of Economic Experts and by the Economic Research Institutes. Then, we perform rationality tests for these forecast series. The Allensbach forecasts outperform the professional forecasts in many respects. Finally, we ask whether information included in short-term interest rates is reflected in the different forecasts. We show that the Allensbach forecasts seem to fully take into account this information, while the professional forecasts do not. Thus, when making expectations, the German general public seems to consider more information than the professional forecasters.

Rational expectations, economic forecasts

Abstract:
No abstract available.

Abstract:
This paper critically assesses the current policy consensus that greater integration into the world economy is beneficial for poor countries. Both the theoretical and empirical basis is examined, concentrating on a) modern growth theory in an open-economy setting, and b) a wide range of newer empirical studies on the link between openness and economic performance. Throughout great emphasis is placed on dynamic gains and losses, and the importance of knowledge diffusion and technical progress. Although endogenous growth theory is often used to highlight the dynamic gains from economic integration, there is a surprising amount of ambiguity. The literature suggests a number of possibilities for divergence, due to linkage effects and endogenous learning. In contrast, open-economy extensions of the neo-classical growth model provide a much clearer case for greater openness and economic integration. Empirically, there is little evidence of convergence in per-capita incomes between rich and poor countries, irrespective of whether one considers longer time series or the post-war period only. The last two decades have even witnessed an acceleration in the speed of divergence. The empirical evidence on the link between openness and economic performance does not provide unambiguous support for the policy consensus. For instance, there is no robust econometric evidence linking faster economic growth to trade liberalisation. However, there is some evidence at the aggregate level for technological and knowledge spillovers between rich and poor countries. It is difficult to pinpoint the reasons though. Microeconomic studies find that exporting activities do not seem to make firms more efficient, and foreign direct investment does not raise diffusion of knowledge to developing country firms. We are thus left with the conclusion that the potential benefits of greater openness and, by implication, increased globalisation for developing countries have been significantly overstated. There simply is neither the empirical evidence to substantiate the claims, nor are there unambiguous theoretical results.

Globalisation, openness, open-economy growth theory, convergence