Trust and Fiscal Performance: A Panel Analysis with Swiss Data

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Paldam (2000, p. 649) Terms of use: Documents in EconStor may IntroductionSeveral OECD countries have accumulated large government debts over the last 30 years. Very much the same applies for sub-federal governments. Why do we observe large debts in certain governments but not in others? An explanation to that question can be found looking at the institutional framework of jurisdictions. They are particularly important for fiscal policy decisions as fiscal institutions create the environment, the incentives, the rules, the regulations and the constraints under which budgets are drafted, approved, and implemented. Fiscal institutions can promote fiscal discipline if properly designed while an institutional framework that results in soft budget constraints provides incentives for loose fiscal discipline. These rules greatly vary over governments and thus provide a reasonable explanation for cross-section variations in debt levels However, it will never be possible to design a constitution and to establish a framework of quantitative and procedural institutions that answers all future questions of a society. Hence, in all those cases where there is a degree of uncertainty, trust becomes a crucial aspect. Guerra and Zizzo (2003) point out that "without uncertainty, trust is not a significant issue because certainty means the outcome will be the same whether or not a trusting act was involved" (p. 3).Mutual trust in the case of uncertainty reduces transaction costs and makes the institutional architecture to work smoothly (Putnam 1993(Putnam , 2000Fukuyama 1995). Trust can be seen as the social capital of a society. Alesina and La Ferrara (2002) point out that social capital and trust lead to better functioning of public institutions and help in case of market imperfections. Consequently, trust should be a crucial aspect in explaining fiscal policy decisions. Moreover, it is reasonable to assume that deep-seated social capital fosters fiscal discipline.The paper concentrates on the relationship between public debts and trust in the government using the full sample of Swiss state governments over the 1981-2001 period. We measure trust as the ratio of concurrence between Swiss state (cantonal) government's recommendation for an issue put to a vote and the actual outcome at the ballot, but also taking into consideration the number of ballots per year to measure the level of citizens' chance to express their preferences. Ballots help to increase governmental accou...

Competition and Cooperation in Economics and Business

“…Then Andreoni et al (1998) propose a study to explore the effect of psychological, social and moral norms on tax compliance, in order to explain and understand the level of this compliance-is-more-than-estimate issue. Research on morals by Bobek and Hatfield (2003), ethics research by Wenzel (2004), Torgler and Schaltegger (2005) and the study of social norms by Alm et al (1999), Wenzel (2004) and Bobek et al (2007) respond to the proposal. The results of these studies show that social norms, ethics and morals have strong influence on the behavior of tax compliance.…”