The Effect of Direct Democracy on Income Redistribution:Evidence for Switzerland

Lars Feld, Justina A. V. Fischer and Gebhard Kirchgässner

STICERD - Political Economy and Public Policy Paper Series from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE

Abstract: There is an intensive dispute in political economics about the impact of institutions on incomeredistribution. While the main focus is on comparison between different forms of representativedemocracy, the influence of direct democracy on redistribution has attracted much lessattention. According to theoretical arguments and previous empirical results, governmentpolicies of income redistribution are expected to be more in line with median voter preferencesin direct than in representative democracies. In this paper, we find that institutions ofdirect democracy are associated with lower public spending and revenue, particularly lowerwelfare spending and broad-based income and property (wealth) tax revenue. Moreover, weestimate a model which explains the determinants of redistribution using panel data providedby the Swiss Federal Tax Office from 1981 to 1997 and a cross section of (representative)individual data from 1992. While our results indicate that less public funds are used to redistributeincome and actual redistribution is lower, inequality is not reduced to a lesser extent indirect than in representative democracies for a given initial income distribution. This findingmight well indicate the presence of efficiency gains in redistribution policies.

Keywords: Income Redistribution; Direct Democracy; Referenda; Initiatives. (search for similar items in EconPapers)
JEL-codes: D7 D78 H11 H75 I30 (search for similar items in EconPapers)
Date: 2006-10
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: THE EFFECT OF DIRECT DEMOCRACY ON INCOME REDISTRIBUTION: EVIDENCE FOR SWITZERLAND (2010)
Working Paper: The Effect of Direct Democracy on Income Redistribution: Evidence for Switzerland (2006)
Working Paper: The Effect of Direct Democracy on Income Redistribution: Evidence for Switzerland (2006)
Working Paper: The effect of direct democracy on income redistribution: evidence for Switzerland (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:stipep:23

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