Do Large Cabinets Favor Large Governments? Evidence from Swiss Sub-federal Jurisdictions

Christoph Schaltegger and Lars Feld

CREMA Working Paper Series from Center for Research in Economics, Management and the Arts (CREMA)

Abstract: The fiscal commons problem is one of the most prominent explanations of excessive spending and indebtedness in political economics. The more fragmented a government, the higher its spending, deficits and debt. In this paper we investigate to what extent this problem can be miti-gated by different fiscal or constitutional institutions. We distinguish between two variants of fragmented governments: cabinet size and coalition size. Theoretically, they both describe the degree to which the costs of spending decisions are internalized by individual decision-makers. In addition, we evaluate whether constitutional rules for executive and legislation as well as budget rules shape the size of government and how the different rules interact with fragmentation in de-termining government size. The empirical study of the role of fragmented governments for fiscal policy outcomes is based on a panel of the 26 Swiss cantons over the 1980-1998 period. The re-sults indicate that the number of ministers in the cabinet is negatively associated with fiscal disci-pline. Furthermore, the fiscal referendum does effectively restrict the fiscal commons problem, but less successfully than the budget rule.

Keywords: Fragmentation; Fiscal Policy; Referendums; Legislative Rules; Budget Rules (search for similar items in EconPapers)
JEL-codes: E61 E63 H61 (search for similar items in EconPapers)
Date: 2004-07
New Economics Papers: this item is included in nep-mac, nep-pbe and nep-pol
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Citations: View citations in EconPapers (12)

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Working Paper: Do Large Cabinets Favor Large Governments? Evidence from Swiss Sub-Federal Jurisdictions (2004)
Working Paper: Do Large Cabinets Favor Large Governments? Evidence from Swiss Sub-federal Jurisdictions (2004)
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