Regional Risk Sharing and Redistribution - The Role of Fiscal Mechanisms in Switzerland

38 Pages Posted: 19 Apr 2018

See all articles by Lars P. Feld

Lars P. Feld

Walter Eucken Institute

Christoph A. Schaltegger

University of St. Gallen - CREMA

Janine Studerus

University of St. Gallen

Date Written: February 21, 2018

Abstract

This paper analyses the importance of fiscal mechanisms for regional risk sharing and redistribution in Switzerland. Switzerland is a particularly interesting setting in this context because it features both a high level of fiscal autonomy for Swiss cantons and explicit fiscal transfers between the federal government and the cantons. Based on panel-data analysis we study the redistributive and stabilizing properties of fiscal equalization transfers, federal government transfers in general, direct federal taxation, the unemployment insurance scheme and the first pillar pension scheme. We find a combined redistributive effect of these mechanisms of about 20%. This means that long-run income differentials of 1 Swiss Franc between cantons translate into differences of long-run disposable income after taxes and transfers of about 80 cents. The combined contemporary stabilization effect with respect to short-term income fluctuations amounts to less than 10%, which is a small effect compared to previous findings for other countries.

Keywords: regional risk sharing, redistribution, fiscal transfers

JEL Classification: E620, H100, H700

Suggested Citation

Feld, Lars P. and Schaltegger, Christoph A. and Studerus, Janine, Regional Risk Sharing and Redistribution - The Role of Fiscal Mechanisms in Switzerland (February 21, 2018). CESifo Working Paper Series No. 6902. Available at SSRN: https://ssrn.com/abstract=3164782

Lars P. Feld (Contact Author)

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg im Breisgau, Baden-W├╝rttemberg D-79100
Germany

Christoph A. Schaltegger

University of St. Gallen - CREMA ( email )

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

Janine Studerus

University of St. Gallen ( email )

Langgasse 1
St. Gallen, 9008
Switzerland

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