Risk sharing, regional stabilization, and redistribution: the role of fiscal mechanisms in Switzerland

Lars Feld, Christoph Schaltegger and Janine Studerus

Oxford Economic Papers, 2021, vol. 73, issue 2, 601-622

Abstract: This paper analyses the importance of fiscal mechanisms for regional stabilization and redistribution in Switzerland. Switzerland is particularly interesting in this context because it features both a high level of fiscal autonomy for Swiss cantons, and explicit fiscal transfers between the federal government and the cantons. Based on a panel data analysis, we study the redistributive and stabilizing properties of fiscal equalization transfers, federal government transfers in general, direct federal taxation, the unemployment insurance scheme, and the first pillar pension scheme. We find a combined redistributive effect of these mechanisms of about 20%. This means that long-run income differentials of 1 Swiss franc between cantons translate into differences of long-run disposable income after taxes and transfers of about 80 cents. The combined contemporary stabilization effect with respect to short-term income fluctuations amounts, at best, to 10%, which is a small effect compared to previous findings for other countries.

JEL-codes: E63 F42 H23 H71 H77 (search for similar items in EconPapers)
Date: 2021
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