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Fiscal federalism and economic performance new evidence from Switzerland

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  • Burret, Heiko T.
  • Feld, Lars P.
  • Schaltegger, Christoph A.

Abstract

The link between fiscal federalism and economic performance is still ambiguous. Aiming at clarification, we improve on a widespread shortcoming by measuring fiscal 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 fiscal federalism varies between cantons and across time. By exploiting this setting, a two-way fixed-effects approach provides evidence for the expected heterogeneity: The impact of fiscal 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 for cooperative elements the effects are not unambiguously identified.

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  • Burret, Heiko T. & Feld, Lars P. & Schaltegger, Christoph A., 2022. "Fiscal federalism and economic performance new evidence from Switzerland," European Journal of Political Economy, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:poleco:v:74:y:2022:i:c:s0176268021001300
    DOI: 10.1016/j.ejpoleco.2021.102159
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    16. Reingewertz, Yaniv, 2014. "Fiscal Decentralization - a Survey of the Empirical Literature," MPRA Paper 59889, University Library of Munich, Germany.
    17. Cong Minh Huynh & Hoai Nam Tran, 2021. "Moderating effects of corruption and informality on the fiscal decentralization—economic growth nexus: Insights from OECD countries," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 92(2), pages 355-373, June.
    18. Thushyanthan Baskaran & Lars P. Feld & Sarah Necker, 2017. "Depressing dependence? Transfers and economic growth in the German states, 1975–2005," Regional Studies, Taylor & Francis Journals, vol. 51(12), pages 1815-1825, December.
    19. Bartolini, David & Ninka, Eniel & Santolini, Raffaella, 2017. "Tax Decentralisation, Labour productivity and Employment," MPRA Paper 81070, University Library of Munich, Germany.
    20. Horváth, Gyula & Lóránd, Balázs, 2012. "Decentralizáció és gazdasági fejlődés. Az olasz példa [Decentralization and economic development. The case of Italy]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1273-1298.

    More about this item

    Keywords

    Fiscal federalism; Economic growth; Fiscal competition; Fiscal equalization;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

    Statistics

    Access and download statistics

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