Why direct democracy in Switzerland could not prevent the public expenditure to GDP ratio from rising

Switzerland experienced a strong increase in government spending during the 1990's. The immediate reasons are well-known: higher expenditure for the elderly and other areas of social security as well as higher expenditure for health care make up most of the increase. The political reasons are n...

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Bibliographic Details
Published in:Zeitschrift für Wirtschaftspolitik 2006-01, Vol.55 (3), p.262-288
Main Author: Bodmer, Frank
Format: Article
Language:ger
Subjects:
Direct democracy
Political stability
Political systems
Population ageing
Public expenditure
Public finance
Social security financing
Switzerland
Welfare state
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Summary:Switzerland experienced a strong increase in government spending during the 1990's. The immediate reasons are well-known: higher expenditure for the elderly and other areas of social security as well as higher expenditure for health care make up most of the increase. The political reasons are not that clear, however. A by now large literature argues that direct democracy in Switzerland reduces government spending at the level of cantons and municipalities. First, the theoretical and empirical basis for this claim is critically reviewed. Second, it is found that the variation of direct democracy between cantons had no effect on the growth of government spending during the 1990's. Third, the effect of direct democracy on the level of spending is not negative in all specifications and was decreasing during the 1990's. Reprinted by permission of Lucius and Lucius Verlagsgesellschaft
ISSN:0721-3808