 Are fiscal adjustments less successful in decentralized governments?Christoph Schaltegger and Lars Feld European Journal of Political Economy, 2009, vol. 25, issue 1, 115-123 Abstract: A common political claim is that decentralized governments undermine policy-makers' ability to resist fiscal imbalance. This paper examines how fiscal centralization influences the likelihood of a successful fiscal adjustment. Using a panel of Swiss cantons from 1981 to 2001, we empirically investigate the determinants of successful long-lasting deficit reductions. Contrary to some results in the literature, we find that fiscal centralization significantly decreases the probability of a successful fiscal consolidation when the contravening effects of competitive and cooperative federalism are disentangled. The results also point to an important role of the economic environment, in particular the size of the primary balance in the years before the consolidation, in determining whether adjustment policy is successful. Keywords: Fiscal; adjustment; Fiscal; decentralization; Fiscal; institutions (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:25:y:2009:i:1:p:115-123 Access Statistics for this article European Journal of Political Economy is currently edited by J. De Haan, A. L. Hillman and H. W. Ursprung More articles in European Journal of Political Economy from Elsevier |
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