On government centralization and fiscal referendums

Lars P. Feld (), Christoph A. Schaltegger and Jan Schnellenbach ()

European Economic Review, 2008, vol. 52, issue 4, pages 611-645

Abstract: Several authors have argued that a centralization of fiscal powers in a federation is less likely to occur if citizens have to approve a change in the assignments of responsibilities by a popular referendum. This outcome may be due to the fact that logrolling is more difficult under direct than under representative democracy. It may also be caused by citizens' fear that a centralization of fiscal authority facilitates the extraction of rents by the government or the legislature. In this paper, we test the hypothesis that centralization is less likely under referendum decision-making in the unique institutional setting of Switzerland. Using a panel of Swiss cantons from 1980 to 1998, the empirical analysis provides evidence that referendums induce less centralization of fiscal activities.

Date: 2008

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