Download this Paper Open PDF in Browser

On Government Centralization and Fiscal Referendums: A Theoretical Model and Evidence from Switzerland

40 Pages Posted: 18 Aug 2005  

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 St. Gallen - CREMA

Jan Schnellenbach

BTU Cottbus-Senftenberg, Institute for Economics, Chair for Microeconomics; Walter Eucken Institute

Date Written: March 2005

Abstract

We propose and test a positive model of fiscal federalism in which centralization is less likely to occur in jurisdictions with referendum decisions on policy centralization. Citizens choose centralization of public spending and revenue in order to internalize spillovers if individual preferences in two jurisdictions are sufficiently homogeneous. Under representative democracy, centralization is inefficiently high because representatives can extract political rents by policy centralization. Referendums thus restrict representatives' ability for rent extraction. An empirical analysis using a panel of Swiss cantons from 1980 to 1998 supports the hypothesis that centralization is less likely under referendum decision-making.

Keywords: Centralization, Fiscal Federalism, Fiscal Referendums

JEL Classification: H1, H7, D72

Suggested Citation

Feld, Lars P. and Schaltegger, Christoph A. and Schnellenbach, Jan, On Government Centralization and Fiscal Referendums: A Theoretical Model and Evidence from Switzerland (March 2005). Available at SSRN: https://ssrn.com/abstract=781884 or http://dx.doi.org/10.2139/ssrn.781884

Lars Feld

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

Christoph Schaltegger

University of St. Gallen - CREMA ( email )

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

Jan Schnellenbach (Contact Author)

BTU Cottbus-Senftenberg, Institute for Economics, Chair for Microeconomics ( email )

Erich-Weinert-Str. 1
Cottbus, 03046
Germany

HOME PAGE: http://https://www.b-tu.de/fg-vwl-mikro/team/prof-dr-jan-schnellenbach

Walter Eucken Institute ( email )

Goethestr. 10
Freiburg, 79100
Germany

HOME PAGE: http://www.eucken.de

Paper statistics

Downloads
92
Rank
241,570
Abstract Views
1,170