On Government Centralization and Budget Referendums: Evidence from Switzerland

36 Pages Posted: 14 Jan 2002

See all articles by Christoph A. Schaltegger

Christoph A. Schaltegger

University of St. Gallen - CREMA

Lars P. Feld

Walter Eucken Institute; University of Freiburg - College of Economics and Behavioral Sciences; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: December 2001

Abstract

Previous theoretical and empirical research has shown that policymakers have an incentive to centralize government activities in order to weaken the competitive pressure of fiscal federalism. We propose and test a positive model of fiscal federalism in which centralization is less likely to occur where budget referendums are possible. The reason for this result is that budget referendums reduce the extent to which pro-centralization regions can commit to a low level of spending delegating the centralization choice to elected policymakers. In addition, it reduces the ability of higher level policy-makers to attract additional responsibilities in order to gain policy discretion. Empirical findings from a panel data analysis for Swiss cantons from 1980 to 1998 support this hypothesis.

Keywords: Centralization, Fiscal Federalism, Budget Referendums

JEL Classification: H1, H7, D72

Suggested Citation

Schaltegger, Christoph A. and Feld, Lars P., On Government Centralization and Budget Referendums: Evidence from Switzerland (December 2001). CESifo Working Paper Series No. 615. Available at SSRN: https://ssrn.com/abstract=294820

Christoph A. Schaltegger

University of St. Gallen - CREMA ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
Switzerland

Lars P. Feld (Contact Author)

Walter Eucken Institute ( email )

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

University of Freiburg - College of Economics and Behavioral Sciences ( email )

Freiburg, D-79085
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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