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Public Good Provision in a Federalist Country: Tiebout Competition, Fiscal Equalization, and Incentives for Efficiency in Switzerland


Widmer, Philippe K; Zweifel, Peter (2010). Public Good Provision in a Federalist Country: Tiebout Competition, Fiscal Equalization, and Incentives for Efficiency in Switzerland. Working paper series / Socioeconomic Institute No. 804, University of Zurich.

Abstract

The purpose of this paper is twofold. First, it measures the efficiency in the provision of public goods by local jurisdictions applying Data Envelopment Analysis (DEA). Second, it relates ef- ficiency scores to a fiscal equalization scheme designed to mitigate the negative consequences of Tiebout competition. The data come from the 26 cantons of Switzerland (2000-2004), a country characterized by marked federalism. Results show the equalization scheme to indeed have a negative influence on performance, resulting in an efficiency-equity trade-off (Stiglitz, 1988). However, substitution of earmarked payments by lump-sum payments as part of the 2008 reform is likely to enhance cantonal performance.

Abstract

The purpose of this paper is twofold. First, it measures the efficiency in the provision of public goods by local jurisdictions applying Data Envelopment Analysis (DEA). Second, it relates ef- ficiency scores to a fiscal equalization scheme designed to mitigate the negative consequences of Tiebout competition. The data come from the 26 cantons of Switzerland (2000-2004), a country characterized by marked federalism. Results show the equalization scheme to indeed have a negative influence on performance, resulting in an efficiency-equity trade-off (Stiglitz, 1988). However, substitution of earmarked payments by lump-sum payments as part of the 2008 reform is likely to enhance cantonal performance.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Socioeconomic Institute (former)
Dewey Decimal Classification:330 Economics
JEL Classification:C14, C67, H11, H72, H83
Language:English
Date:December 2010
Deposited On:29 Nov 2011 15:09
Last Modified:07 Dec 2017 10:00
Series Name:Working paper series / Socioeconomic Institute
Official URL:http://www.econ.uzh.ch/wp.html

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