Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/214332 
Year of Publication: 
2005
Series/Report no.: 
CREMA Working Paper No. 2005-18
Publisher: 
Center for Research in Economics, Management and the Arts (CREMA), Basel
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 cen-tralization. Citizens choose centralization of public spending and revenue in order to internalize spillovers if individual preferences in two jurisdictions are suffi-ciently homogeneous. Under representative democracy, centralization is ineffi-ciently high because representatives can extract political rents by policy centrali-zation. 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.
Subjects: 
Centralization
Fiscal Federalism
Fiscal Referendums
JEL: 
H1
H7
D72
Document Type: 
Working Paper

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