Vertical Effects of Fiscal Rules - The Swiss Experience

39 Pages Posted: 5 Nov 2014

See all articles by Heiko Burret

Heiko Burret

Walter Eucken Institute

Lars P. Feld

Walter Eucken Institute

Date Written: October 24, 2014

Abstract

Formal fiscal rules have been introduced in many countries throughout the world. While most studies focus on intra‐jurisdictional effects of fiscal rules, vertical impacts on the finances of other levels of governments have yet to be explored thoroughly. The paper investigates the influence of Swiss cantonal debt brakes on municipal finances during the years 1980‐2011 by examining cantonal aggregated and disaggregated local data. A Difference‐in‐Differences estimation (two-way fixed effects) provides little evidence that budget constraints at the cantonal level affect municipal finances and fiscal decentralization, respectively.

Keywords: fiscal rules, vertical effects, fiscal shocks, decentralization, sub-national finances

JEL Classification: H600, H770, H740, H720

Suggested Citation

Burret, Heiko and Feld, Lars P., Vertical Effects of Fiscal Rules - The Swiss Experience (October 24, 2014). CESifo Working Paper Series No. 5043, Available at SSRN: https://ssrn.com/abstract=2519454

Heiko Burret

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg, 79100
Germany

Lars P. Feld (Contact Author)

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg im Breisgau, Baden-Württemberg D-79100
Germany

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