Fiscal Fragmentation in Decentralized Countries

Fiscal Fragmentation in Decentralized Countries

Subsidiarity, Solidarity and Asymmetry

Edited by Richard M. Bird and Robert D. Ebel

Most countries, developed and developing, are fiscally decentralized with regional and local governments of varying importance. In many of these countries, some of these sub-national governments differ substantially from others in terms of wealth, ethnic, religious, or linguistic composition. This book considers how fiscal arrangements may strengthen or weaken national solidarity and the effectiveness with which public services are provided. In particular, the nation’s ability to cope with changes created by decentralization is explored.

Chapter 5: Accommodating Asymmetry Through Pragmatism: An Overview of Swiss Fiscal Federalism

Bernard Dafflon

Subjects: economics and finance, political economy, public sector economics, politics and public policy, political economy


Bernard Dafflon This chapter deals with issues of symmetry and asymmetry in the Swiss federal system. It begins by addressing three crucial issues of fiscal democracy that have relevance for Switzerland’s system of decentralized public finance: the vertical division of power; the institutional background of direct democracy; and the generally cooperative, but in some aspects competitive, behaviour of governmental actors. The following section explains the structure and volume of Switzerland’s public sector. This lays the foundations for an analysis of another three issues closely connected to public expenditures and revenues: the application of the subsidiarity principle, the recent phenomenon of creeping centralization and the efforts made towards tax harmonization. The chapter then tackles the issues of subnational budget balance and debt control and their impact on national macroeconomic policy before concluding. Switzerland is a small country located at the heart of Europe without being a member of the European Union (see Figure 5.1 for a map). The population, 7.2 million in 2000, consists mainly of German-speaking (63.7 per cent), French-speaking (20.4 per cent), Italian-speaking (6.5 per cent) and Romansh-speaking (0.5 per cent) people. All four languages are national languages entrenched in the constitution (Article 4 in the new constitution of 18 April 1999). Some 42 per cent of the population is Roman Catholic and 35 per cent is Protestant. Of the 26 cantons, 14 cantons have a Catholic majority, 9 of which are more than 70 per cent Catholics, and 7 cantons have a Protestant majority, but in none of...

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