Cost-Shifting in Multitiered Welfare States: Responding to Rising Welfare Caseloads in Germany and Switzerland

Giuliano Bonoli and Philipp Trein

Publius: The Journal of Federalism, 2016, vol. 46, issue 4, 596-622

Abstract: In this article, we analyze if and how different levels of government off-load clients onto other welfare state programs that are not under their financial responsibility. We hypothesize that the extent to which cost-shifting takes place in a multitiered welfare state depends on the degree of fiscal centralization, and we expect cost-shifting to be more prevalent in federal countries where the constituent units have strong fiscal autonomy. In order to empirically examine this claim, we compare Germany and Switzerland, two federal countries that differ considerably in matters of fiscal centralization. Empirically, we find that in fact cost-shifting occurred irrespective of the degree of fiscal centralization. However, there are differences in how the two countries reacted to cost-shifting practices. Fiscally centralized Germany has been more successful in limiting cost-shifting practices than decentralized Switzerland. By connecting the literature on social policy and fiscal federalism, the article contributes to a broader understanding of the functioning of multitiered welfare states.

Date: 2016
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