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Fiscal Federalism and Income Inequality: An Empirical Analysis for Switzerland

Lars Feld (), Christian Frey, Christoph Schaltegger () and Lukas A. Schmid

No 7407, CESifo Working Paper Series from CESifo Group Munich

Abstract: This paper analyzes the impact of fiscal federalism on income inequality and redistribution. Theoretically contradicting arguments ask for empirical evidence to obtain a better knowledge of this relationship. We rely on the institutional setting in Switzerland to study the issue empirically. According to our findings tax decentralization tends to reduce concentration in pre- and after-tax income without additional redistribution via progressive taxes. It is, however, crucial to consider the interdependence of decentralization and fragmentation as inequality decreasing effects of decentralization are counteracted by its interaction with fragmentation.

Keywords: federalism; decentralization; inequality; income concentration; top incomes; redistribution; Switzerland (search for similar items in EconPapers)
JEL-codes: D31 H23 H77 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur, nep-pbe, nep-pub and nep-ure
Date: 2018
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