Project

fiscal federalism; tax competition; direct democracy; political economics; panel data; political decentralization

Lead
Lay summary
Switzerland is a prototypical federal democracy and, in many ways, a small-scale version of much larger federations. Our country's extreme degree of fiscal and political decentralization, its remarkable institutional heterogeneity at the sub-federal level, and its long history of political stability mean that Swiss data represent a uniquely propitious laboratory within which to test a number of hypotheses that are of interest well beyond the confines of the national policy debate.Our central objective is to gather and analyze long data series for Switzerland in order to learn about the dynamics of policy interactions among non-coordinated jurisdictions. We thereby seek to unlock the full potential of the "Swiss laboratory" and to exploit it by investigating a number of interlinked questions in public finance and political economics. Most of these questions are of scientific as well as policy interest: - How do tax havens emerge? - Is sub-federal tax competition a zero-sum or a positive-sum game? - Can local fiscal authorities tax agglomeration rents? - Is there a dynamic tradeoff between (low) taxation and (light) regulation? - How do electoral institutions such as direct democracy or women's suffrage affect subsequent economic policy choices?At the core of our proposal is an endeavor to assemble and exploit the most comprehensive longitudinal fiscal and political dataset for Swiss cantons and municipalities to date. While researchers in empirical public finance and political economics have worked with Swiss sub-federal data for some time, the Swiss laboratory in its full historical and institutional richness has as yet remained largely unexploited due to a lack of accessible data. We therefore propose to scour all possible data sources in order to compile long time series where hitherto researchers had to work with a maximum of two to three decades of data. Our corresponding scientific objective is to exploit the resulting longitudinal database for a number of studies focusing on long-term dynamic interactions between institutions, policies and economic outcomes.

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Last update: 21.02.2013

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Switzerland is a prototypical federal democracy and, in many ways, a small-scale version of much larger federations - both existing (such as the United States) and nascent (such as the European Union). Our country’s extreme degree of fiscal and political decentralization, its remarkable institutional heterogeneity at the sub-federal level, and its long history of political stability mean that Swiss data represent a quite uniquely propitious laboratory within which to test a number of hypotheses that are of interest well beyond the confines of the national policy debate.Our central objective is to gather and analyze long data series for Switzerland in order to learn about the dynamics of policy interactions among non-coordinated jurisdictions. We thereby seek to unlock the full potential of the “Swiss laboratory” and to exploit it by investigating a number of interlinked questions in public finance and political economics. Most of these questions are of scientific as well as policy interest: How do tax havens emerge? Is sub-federal tax competition a zero-sum or a positive-sum game? Can local fiscal authorities tax agglomeration rents? Is there a dynamic tradeoff between (low) taxation and (light) regulation? How do electoral institutions such as direct democracy or women’s suffrage affect subsequent economic policy choices?We are four research groups based at different universities (Lausanne, Pompeu Fabra, St. Gallen and Lugano), each headed by one of the applicants. We can also count on the collaboration of fellow researchers in Belgium (ULB), Canada (Waterloo), Germany (Mannheim), the United Kingdom (Bristol) and the United States (Harvard).Our proposal is structured into twelve subprojects, eleven of which involve at least two research groups. (A summary table and illustrative chart are provided in our detailed proposal. Note that for the financial part of our submission, the online form requires us to refer to the research groups as “Subprojects”.)We have three main aims. First, we intend to undertake a major coordinated data collection effort in order to assemble the most comprehensive longitudinal dataset on fiscal and political decentralization in Switzerland to date. The main emphasis will be on finding long time series and on gathering information for both of the two sub-federal jurisdictional levels, cantons and municipalities, as well as for the federal level. This dataset is ultimately to be made publicly available (data protection rules permitting).Second, we aim to produce a number of high-level scientific papers for publication in leading peer-reviewed journals, building on the new longitudinal dataset collected through this project, on our already available data resources, and on the collective expertise of the project collaborators. Our overall project foresees ten specific research subprojects (in addition to data collection and the organization of a scientific workshop). All of these subprojects are collaborative in nature, and nine of them involve more than one research group. Scientific publications represent the principal target output for all research subprojects.Third, we aim to provide research and research-management experience for a post-doctoral fellow, and training for five doctoral students. The longitudinal dataset as well as the ten additional research subprojects will offer a rich source of interesting material for doctoral research. Where possible, we shall strive to involve doctoral students in the project research sufficiently deeply for them to deserve coauthorship.At the core of our proposal is subproject 1, which will involve all project collaborators. Through this subproject, we endeavor to assemble and exploit the most comprehensive longitudinal fiscal and political dataset for Swiss cantons and municipalities to date. While researchers in empirical public finance and political economics (including all four applicants) have worked with Swiss sub-federal data for some time, the Swiss laboratory in its full historical and institutional richness has as yet remained largely unexploited due to a lack of accessible data. This has forced empirical research to rely mainly on cross-cantonal (and in some cases cross-municipal) variation for statistical estimation, with the attendant problems of cross-section identification. We therefore propose to scour all possible data sources in order to compile long time series where hitherto researchers had to work with a maximum of some two to three decades of data. Our corresponding scientific objective is to exploit the resulting longitudinal database for a number of collaborative empirical papers focusing on long-term dynamic interactions between institutions, policies and economic outcomes.The common denominator across the ten remaining research subprojects is the use of Swiss sub-federal data for empirical analyses of issues in public finance and political economics. Ultimately, all of the subprojects will draw on the data collected under subproject 1. However, in the initial phase of the project, while the longitudinal data base is being compiled, a majority of them will be able to proceed based on existing data - in the form of pilot studies or of complementary exercises to those based on the longitudinal data set, or by elaborating on the relevant theory. This will assure visible research outputs from the project already during the data collection period.We are a cohesive network of researchers. All four co-applicants have a track record of prior joint work. We are all are strongly committed to this project, as it would allow us to deepen our collaboration, to extend it to junior researchers, and, crucially, to make possible a whole range of common research projects that hinge on the availability of longitudinal data. Given the large thematic and methodological overlaps, synergies across subprojects as well as across research groups are guaranteed.We consider it a particularly lucky coincidence that a group of promising young Swiss economists with matching research interests is currently based at Pompeu Fabra University in Barcelona. This project will allow them to continue to work on Swiss data and to collaborate with Swiss economists, while allowing the Switzerland-based project collaborators (notably the doctoral students) to interact with one of Europe’s top economics departments. Members of the Barcelona group are active collaborators on ten of our twelve subprojects.For advice from a non-economist perspective, and to act as a conduit for our research towards related areas of social science, we have set up an Interdisciplinary Advisory Board, composed of interested senior researchers in political science, history and law.In addition to our aim of publishing research results in international peer-reviewed journals, we intend to disseminate our findings nationally and internationally through workshops and conferences as well as via internationally visible discussion paper series (CEPR, CESIfo). We shall also strive to communicate our main findings to a wider audience through the media. Our project is strongly geared towards supporting young researchers. Two of the applicants (Schmidheiny and Jametti) are tenure-track assistant professors, as are two Barcelona-based collaborators (Funk and Litschig) and one St. Gallen-based collaborator (Schelker). All five have Swiss nationality. This project would be of evident help to them at the critical “take-off” stage of their academic careers. Finally, we plan to train five doctoral students - at least one in each of our research groups -, as well as a post-doctoral research fellow in Lausanne. The longitudinal dataset will be at their disposal for individual research ideas they may develop. We shall also organize research visits of doctoral students in our respective universities. The participation of the Barcelona group is particularly attractive in this respect.