Fiscal Preferences and Fiscal Performance: Swiss Cantonal Evidence

Abstract

 The growing support to the view that political and institutional settings have a role to play ensuring fiscal performance has paradoxically been accompanied by an increasing lack of confidence about the results achieved. It could be possible that budgetary institutions are endogenous, and their apparent efficiency finally depends on the fiscal preferences of voters and politicians that enact them. We propose a measure of fiscal preferences based on cantonal voters' behavior regarding federal referenda with fiscal content between 1979 and 1998. The empirical model shows that fiscal preferences have a strong inverse effect on fiscal performance: the more a canton is fiscal conservative, the less it accepts deficits, ceteris paribus.