Explaining Fiscal Balances with a Simultaneous Equation Model of Revenue and Expenditure : A Case Study of Swiss Cantons Using Panel Data

Empirical literature on the analysis of the efficiency of measures for reducing persistent government deficits has mainly focused on the direct explanation of deficit. By contrast, this paper aims at modeling government revenue and expenditure within a simultaneous framework and deriving the fiscal balance (surplus or deficit) equation as the difference between the two variables. This setting enables one to not only judge how relevant the explanatory variables are in explaining the fiscal balance but also understand their impact on revenue and/or expenditure. Our empirical results, obtained by using a panel data set on Swiss Cantons for the period 1980-2002, confirm the relevance of the approach followed here, by providing unambiguous evidence of a simultaneous relationship between revenue and expenditure. They also reveal strong dynamic components in revenue, expenditure, and fiscal balance. Among the significant determinants of public fiscal balance we not only find the usual business cycle elements, but also and more importantly institutional factors such as the number of administrative units, and the ease with which people can resort to political (direct democracy) instruments, such as public initiatives and referendum.

Transparency and trust in government (2007-2014): a comparative study

In a 2000 report entitled "Trust in government. Ethics measures in OECD countries," OECD Secretary-General Donald J. Johnston emphasized the fact that public ethics are considered as a keystone of good governance. Moreover, public ethics are a prerequisite to public trust, which is in turn vital not only to any public service, but also to any society in general. At the same time, transparency reforms have flourished over the last few years and have several times been designed as a response to public distrust. Therefore, ethics, transparency and trust are closely linked together in a supposed virtuous circle where transparency works as a factor of better public ethics and leads to more trust in government on the citizens' side. This article explores the links between transparency and levels of trust in 10 countries between 2007 and 2014, using open data indexes and access to information requests as proxies for transparency. A national ranking of transparency, based on requests submitted by citizens to the administration and open data indexes, is then proposed. Key findings show that there is no sharp decline of trust in government in all countries considered in this article, and that transparency and trust in government are not systematically positively associated. Therefore, this article challenges the common assumption, mostly found in the normative literature, about a positive interrelation between the two, where trust in government is conceived as a beneficial effect of administrative transparency.