Fiscal Federalism and Economic Performance - New Evidence from Switzerland

48 Pages Posted: 31 Oct 2018

See all articles by Heiko Burret

Heiko Burret

Walter Eucken Institute

Lars P. Feld

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

Christoph A. Schaltegger

University of Lucerne

Date Written: 2018

Abstract

The link between federalism and economic performance is still ambiguous. Aiming at clarification, we improve on a widespread shortcoming by measuring federalism not just by one variable but by various institutions that constitute it. To this end, Switzerland provides for a laboratory as its 26 cantons share a common framework, while the extent of federalism varies between the cantons and across time. By exploiting this setting, the paper provides evidence for the expected heterogeneity: The impact of federalism on economic performance differs conditional on the federal instrument considered. Overall, instruments of competitive federalism appear to improve economic performance of the cantons, while adverse effects are reported for cooperative elements.

Keywords: fiscal federalism, economic growth, fiscal competition, fiscal equalization

JEL Classification: H770, H730, O430, O470

Suggested Citation

Burret, Heiko and Feld, Lars P. and Schaltegger, Christoph A., Fiscal Federalism and Economic Performance - New Evidence from Switzerland (2018). CESifo Working Paper No. 7250, Available at SSRN: https://ssrn.com/abstract=3275424 or http://dx.doi.org/10.2139/ssrn.3275424

Heiko Burret (Contact Author)

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg, 79100
Germany

Lars P. Feld

Walter Eucken Institute ( email )

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

Christoph A. Schaltegger

University of Lucerne ( email )

Hofstrasse 9
P.O. Box 7464
Luzern 7, CH - 6000
Switzerland

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