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Fiscal federalism and economic performance: New evidence from Switzerland

Heiko Burret (), Lars Feld and Christoph Schaltegger

No 21/01, Freiburg Discussion Papers on Constitutional Economics from Walter Eucken Institut e.V.

Abstract: The link between federalism and economic performance is still ambiguous. Aiming at clarification, we improve on a widespread shortcoming by measuring federalism not just by one variable but by various institutions that constitute it. To this end, Switzerland provides for a laboratory as its 26 cantons share a common framework, while the extent of federalism varies between the cantons and across time. By exploiting this setting, a two-way fixed-effects approach provides evidence for the expected heterogeneity: The impact of federalism on economic performance differs conditional on the federal instrument considered. Overall, instruments of competitive federalism appear to improve economic performance of the cantons, while for cooperative elements the effects are not unambiguously identified.

Keywords: Fiscal Federalism; Economic Growth; Fiscal Competition; Fiscal Equalization (search for similar items in EconPapers)
JEL-codes: H73 H77 O43 O47 (search for similar items in EconPapers)
Date: 2021
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Journal Article: Fiscal federalism and economic performance new evidence from Switzerland (2022) Downloads
Working Paper: Fiscal Federalism and Economic Performance - New Evidence from Switzerland (2018) Downloads
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