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Fiscal rules, fiscal performance and tax competition among municipalities in Switzerland

English title Fiscal rules, fiscal performance and tax competition among municipalities in Switzerland
Applicant Parchet Raphaël
Number 159348
Funding scheme Project funding (Div. I-III)
Research institution Istituto Ricerche Economiche Università della Svizzera Italiana
Institution of higher education Università della Svizzera italiana - USI
Main discipline Economics
Start/End 01.11.2015 - 30.04.2019
Approved amount 211'531.00
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Keywords (2)

Tax competition; Fiscal rules

Lay Summary (French)

Lead
La récente crise financière et économique a mis sur le devant de la scène politique internationale l’adoption de règles budgétaires visant à contrôler étroitement les dépenses publiques, réduire la dette et stimuler la croissance économique. La Suisse fait figure de bon élève en la matière en se do-tant au début des années 2000 d’un mécanisme de frein à l’endettement au niveau national. En outre, de nombreux cantons ont introduit des règles budgétaires visant à encadrer non seulement les budgets cantonaux mais aussi municipaux. La diversité des règles institutionnelles au niveau des cantons et des communes fait de la Suisse un laboratoire d’observation idéal pour étudier les effets de ces règles budgétaires.
Lay summary

Contenu et objectifs du travail de recherche

L’objectif de cette recherche est double. Dans un premier temps, elle se propose d’analyser les effets des règles budgétaires au niveau des communes suisses sur la santé des finances publiques communales à travers une analyse de l’évolution des dépenses publiques et de l’endettement. Une attention particulière sera portée aux interactions entre règles fiscales des communes et celles des cantons.

Le deuxième objectif est d’analyser les effets de ces règles budgétaires sur les relations intercommunales. Au travers d’une étude théorique et d’une analyse empirique, cette recherche cherchera à comprendre comment l’adoption de règles budgétaires influence et modifie la concurrence fiscale entre communes suisses. 

Contexte scientifique et social du projet de recherche

Plusieurs cantons suisses discutent actuellement d’une réforme de leurs règles budgétaires. Ce projet de recherche vise à informer, au travers d’une méthodologie rigoureuse, le débat politique sur les effets et l’efficacité des règles budgétaires.

 

Direct link to Lay Summary Last update: 08.10.2015

Responsible applicant and co-applicants

Employees

Name Institute

Publications

Collaboration

Group / person Country
Types of collaboration
William H. Hoyt, University of Kentucky United States of America (North America)
- in-depth/constructive exchanges on approaches, methods or results

Scientific events

Active participation

Title Type of contribution Title of article or contribution Date Place Persons involved
Swiss Workshop on Local Public Finance and Regional Economics Talk given at a conference Municipalities and budget balance rules: evidence from Switzerland 20.05.2019 Lugano, Switzerland Laura Casellini;
Research Seminar at the Helsinki Graduate School of Economics Labor and Public Economics Seminar Individual talk Who Bears the Burden of Local Taxes? 13.05.2019 Helsinki, Finland Parchet Raphaël;
Research seminar, University of Fribourg Individual talk Who Bears the Burden of Local Taxes? 01.03.2019 Fribourg, Switzerland Parchet Raphaël;
Third Dondena Workshop on Public Policy Talk given at a conference Who Bears the Burden of Local Taxes 17.12.2018 Milan, Italy Parchet Raphaël;
Annual Meeting of the Urban Economics Association Talk given at a conference Who Bears the Burden of Local Taxes? 12.10.2018 New York, United States of America Parchet Raphaël;
ZEW Public Finance Conference Talk given at a conference Fiscal Rules and Fiscal Performance: Evidence from Switzerland 23.04.2018 Mannheim, Germany Laura Casellini;
Tax reading group, University of Kentucky Individual talk Fiscal Rules and Fiscal Performance: Evidence from Switzerland 14.02.2018 Kentucky, United States of America Laura Casellini;
Young Swiss Economists Meeting Talk given at a conference Fiscal Rules and Fiscal Performance: Evidence from Switzerland 01.02.2018 Zurich, Switzerland Laura Casellini;
73rd Annual Congress of the International Institute of Public Finance (IIPF) Talk given at a conference Fiscal Rules and Fiscal Performance: Evidence from Switzerland 18.08.2017 Tokyo, Japan Laura Casellini;
Swiss Society of Economics and Statistics (SSES) Annual Meeting Talk given at a conference Fiscal Rules and Fiscal Performance: Evidence from Switzerland 09.06.2017 Lausanne, Switzerland Parchet Raphaël;


Communication with the public

Communication Title Media Place Year
Talks/events/exhibitions Fiskalregeln, fiskalische Leistungsfähigkeit und Steuerwettbewerb der Schweizer Gemeinden German-speaking Switzerland 2019

Associated projects

Number Title Start Funding scheme
182380 Sorting, Tax Competition and the Rise of Local Tax Heavens 01.09.2019 Project funding (Div. I-III)
147668 The Swiss Confederation: A Natural Laboratory for Research on Fiscal and Political Decentralization 01.01.2014 Sinergia

Abstract

Fiscal rules have been introduced at national or sub-national levels in many countries around the world with the aim of reducing public deficits and public debt, strengthening fiscal discipline and fostering economic performance. The recent financial and economic crises have put these fiscal rules (or the lack thereof) at the center of the policy debate. Switzerland, with its long history of political and fiscal decentralization, has been an ideal setting to study the effects of fiscal rules at the sub-national level. The focus of the existing literature has been so far the cantonal level. Studies of the effects of fiscal rules at the municipality level have been scarce and limited by the use of cross-sectional variation on a small sample of municipalities. Moreover, the existing literature abstracts from vertical interdependencies between municipality-level and canton-level fiscal rules. These vertical interdependencies can be crucial as the effects of institutions of one level of government could potentially be canceled by the lack thereof at another level. The aim of this project is, first, to extend the existing literature and analyze the effect of fiscal rules at the municipality level on their fiscal performance. Several cantons have introduced in the last 15 years different balanced budget requirements for their municipalities, creating cross-sectional but also time variation to exploit empirically. A key aspect of this analysis will be to take into account vertical interdependencies between canton-level and municipality-level fiscal rules.The second aim of this project is to investigate how fiscal rules affect tax competition among local jurisdictions. Balanced budget rules plausibly create different incentives for local governments in their tax setting, which might therefore change their strategic interactions. One hypothesis is that, under more stringent rules, municipalities are less likely to pursue a tax-base preservation strategy by lowering their tax rate than to pursue an expenditure-preservation strategy by increasing their tax rate.
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