Fiscal Federalism and Income Inequality: An Empirical Analysis for Switzerland

60 Pages Posted: 21 Feb 2019

See all articles by Lars P. Feld

Lars P. Feld

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

Christian Frey

University of Lucerne - Faculty of Economics and Management

Christoph A. Schaltegger

University of St. Gallen; University of Lucerne

Lukas Schmid

University of Lucerne - Faculty of Economics and Management

Date Written: 2018

Abstract

This paper analyzes the impact of fiscal federalism on income inequality and redistribution. Theoretically contradicting arguments ask for empirical evidence to obtain a better knowledge of this relationship. We rely on the institutional setting in Switzerland to study the issue empirically. According to our findings tax decentralization tends to reduce concentration in pre- and after-tax income without additional redistribution via progressive taxes. It is, however, crucial to consider the interdependence of decentralization and fragmentation as inequality decreasing effects of decentralization are counteracted by its interaction with fragmentation.

Keywords: federalism, decentralization, inequality, income concentration, top incomes, redistribution, Switzerland

JEL Classification: D310, H230, H770

Suggested Citation

Feld, Lars P. and Frey, Christian and Schaltegger, Christoph A. and Schmid, Lukas, Fiscal Federalism and Income Inequality: An Empirical Analysis for Switzerland (2018). CESifo Working Paper No. 7407. Available at SSRN: https://ssrn.com/abstract=3338761

Lars P. Feld (Contact Author)

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

Christian Frey

University of Lucerne - Faculty of Economics and Management ( email )

Lucerne
Switzerland

Christoph A. Schaltegger

University of St. Gallen ( email )

Langgasse 1
St. Gallen, 9008
Switzerland

University of Lucerne ( email )

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

Lukas Schmid

University of Lucerne - Faculty of Economics and Management ( email )

Lucerne
Switzerland

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