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Vatter, A; Freitag, M (2008). Decentralization and fiscal discipline in sub-national governments. Evidence from the Swiss Federal system. Publius: The Journal of Federalism, 38(2):272-294.

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Abstract

This article analyses the relationship between decentralization and the extent of fiscal discipline in the Swiss cantons between 1984 and 2000. From a theoretical point of view, decentralization and federalism can be associated with both an expansive and a dampening effect on government debt. On the one hand, decentralized structures have been argued to lead to a reduction of debt due to inherent competition between the member states and the multitude of veto positions which restrict public intervention. On the other hand, decentralization has been claimed to contribute to an increase of public debt as it involves expensive functional and organizational duplications as well as cost-intensive, often debt-financed, compromise solutions between a large number of actors that operate in an uncoordinated and contradictory way. Our empirical results show that in periods of prosperous economic development, the architecture of state structure has no impact on debt. However, the degree of decentralization influences debt in economically poor times: In phases of economic recession, administratively decentralized cantons implement a more economical budgetary policy than centralized Swiss member states.

Item Type:Journal Article, refereed, original work
Communities & Collections:06 Faculty of Arts > Institute of Political Science
DDC:320 Political science
Language:English
Date:11 January 2008
Deposited On:24 Dec 2008 14:09
Last Modified:23 Nov 2012 13:50
Publisher:Oxford University Press
ISSN:0048-5950
Publisher DOI:10.1093/publius/pjm038
Citations:Google Scholar™
Scopus®. Citation Count: 8

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