On Government Centralization and Fiscal Referendums: A Theoretical Model and Evidence from Switzerland

Lars Feld, Jan Schnellenbach and Christoph Schaltegger

No 200419, Marburg Working Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: We propose and test a positive model of fiscal federalism in which centralization is less likely to occur in jurisdictions with referendum decisions on policy centralization. Citizens choose centralization of public spending and revenue in order to internalize spillovers if individual preferences in two jurisdictions are sufficiently homogeneous. Under representative democracy, centralization is inefficiently high because representatives can extract political rents by policy centralization. Referendums thus restrict representatives’ ability for rent extraction. An empirical analysis using a panel of Swiss cantons from 1980 to 1998 supports the hypothesis that centralization is less likely under referendum decision-making.

Keywords: Centralization; Fiscal Federalism; Fiscal Referendums (search for similar items in EconPapers)
JEL-codes: D72 H1 H7 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2004
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Citations: View citations in EconPapers (9)

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Working Paper: On Government Centralization and Fiscal Referendums: A Theoretical Model and Evidence from Switzerland (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:mar:volksw:200419

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