How do Electoral Systems Affect Fiscal Policy? Evidence from State and Local Governments, 1890 to 2005

Using a new data set on Swiss state and local governments from 1890 to today, we analyze how the adoption of proportional representation affects fiscal policy. We show that proportional systems shift spending toward broad goods (e.g. education and welfare benefits) but decrease spending on targetable goods (e.g. roads and agricultural subsidies). Our evidence does not suggest that proportional representation increases the overall size of government. We provide new evidence on the mechanism behind these estimates. We show that proportional elections lead to better political representation of left-wing parties, which are associated with more spending. Furthermore, proportional elections lead to higher political fragmentation. However, since political fragmentation increases spending in a plurality system only, proportional elections reduce spending through its more moderate effects of fractionalized parliaments.electoral system, public finance, political fragmentation, matching

How General is Specific Human Capital? Using Mobility Patterns to Study Skill Transferability in the Labor Market

Previous studies assume that labor market skills are either fully general or specific to a firm. This paper uses patterns in mobility and wages to the transferability of specific skills across occupations. The empirical analysis combines information on tasks performed in different occupations with a large panel on complete work histories and wages. Our results demonstrate that labor market skills are partially transferable across occupations. We find that individuals move to occupations with similar task requirements, and that the distance of moves declines with time in the labor market. Further, tenure in the last occupation affects current wages, and the effect is stronger if the two occupations are similar. We calculate that task-specific human capital is an important source of wage growth, especially for university graduatesHuman Capital

Gender gaps in policy making: Evidence from direct democracy in Switzerland

In spite of increasing representation of women in politics, little is known about their impact on policies. Comparing outcomes of parliaments with different shares of female members does not identify their causal impact because of possible differences in the underlying electorate. This paper uses a unique data set on voting decisions to sheds new light on gender gaps in policy making. Our analysis focuses on Switzerland, where all citizens can directly decide on a broad range of policies in referendums and initiatives. We show that there are large gender gaps in the areas of health, environmental protection, defense spending and welfare policy which typically persist even conditional on socio-economic characteristics. We also find that female policy makers have a substantial effect on the composition of public spending, but a small effect on the overall size of government.Female Policy Makers, Political Gender Gaps, Switzerland

Does direct democracy reduce the size of government? New evidence from historical data, 1890-2000

Using historical data for all Swiss cantons from 1890 to 2000, we estimate the causal effect of direct democracy on government spending. The main innovation in this paper is that we use fixed effects to control for unobserved heterogeneity and instrumental variables to address the potential endogeneity of institutions. We find that the budget referendum and lower costs to launch a voter initiative are effective tools in reducing canton level spending. However, we find no evidence that the budget referendum results in more decentralized government or a larger local government. Our instrumental variable estimates suggest that a mandatory budget referendum reduces the size of canton spending between 13 and 19 percent. A 1 percent lower signature requirement for the initiative reduces canton spending by up to 2 percent.Direct Democracy, Fiscal Policy, Switzerland

Does Direct Democracy Reduce the Size of Government? New Evidence from Historical Data, 1890-2000

Using a new dataset of Swiss cantons from 1890 to 2000, we estimate the causal effect of direct democracy on government spending. Our analysis is novel in two ways: first, we use fixed effects to control for unobserved heterogeneity; second, we combine a new instrument with fixed effects to address the potential endogeneity of institutional reform. We find that direct democracy has a constraining, but modest effect on spending. Our estimates suggest that a mandatory budget referendum reduces canton expenditures by 9 percent. A decline in the signature requirement for the voter initiative by one percent reduces spending by 2.2 percent. We find no evidence that direct democracy at the canton level results in higher local spending or a more decentralized government.

Gender gaps in policy making: evidence from direct democracy in Switzerland

This paper uses a unique data set on individual voting decisions to shed new light on gender gaps in policy making. Our analysis focuses on Switzerland, the world leader in direct democracy, where all citizens directly decide on a broad range of policies at the ballot box. Analysing all federal votes held between 1981 and 2003, we show that there are large gender gaps in the areas of health, environmental protection, defence spending and welfare policy. The gender gaps typically persist even conditional on socio-economic characteristics. We also find that female policy-makers have a substantial effect on the composition of public spending, but a small effect on the overall size of governmen

Compulsory Schooling Reforms, Education and Mortality in Twentieth Century Europe

Education yields substantial non-monetary benefits, but the size of these gains is still debated. Previous studies, for example, report contradictory effects of education and compulsory schooling on mortality – ranging from zero to large mortality reductions. Using data from 19 compulsory schooling reforms implemented in Europe during the twentieth century, we quantify the mean mortality effect and explore its dispersion across gender, time and countries. We find that men benefit from compulsory education both in the shorter and longer run. In contrast, compulsory schooling reforms have little or no effect on mortality for women

The end of the Soviet Union’s anti-alcohol campaign may explain a substantial share of Russia’s ‘mortality crisis’ in the 1990s

Russia experienced an extreme spike in death rates in the immediate aftermath of the break-up of the Soviet Union. Jay Bhattacharya, Christina Gathmann and Grant Miller write that while this has typically been explained using political and economic arguments, the real cause of Russia’s mortality crisis may have been the end of Mikhail Gorbachev’s anti-alcohol campaign. Using a series of statistical tests they illustrate that Russian death rates fell significantly during the campaign, with the hardest drinking regions experiencing a larger spike in death rates after the fall of the Soviet Union

Evolution of the East German wage structure

We analyze the evolution of the wage structure in East Germany over the past two decades and compare it to West Germany. Both regions experienced a rise in wage inequality between 1995 and 2009 with wage dispersion in East Germany exceeding West Germany, esp. at the top. We also show that wage inequality is no longer rising in Germany and has even been declining in East Germany after 2009. Compositional changes of the workforce and selection along the employment margin play only a minor role as does the decline of union coverage for the rise in wage inequality. The adoption of minimum wages in selected industries, in contrast, explains all of the turnaround in East German wage inequality after 2009. Demand side changes seem to account for the rise in wage dispersion at the top

College openings and local economic development

We study how the presence of a college affects the local economy using administrative data. Our analysis exploits the opening of new institutions of tertiary education across Germany in the 1980s and 1990s. The new college substantially increased the student population and share of high-skilled workers in the region. Yet, we find no effect on regional wages or employment indicating that the local economies did not experience additional growth through skill-biased technological change, for instance. Instead, there is sizable heterogeneity in the local gains: high-tech firms in manufacturing absorb most of the new college graduates, esp. in engineering professions. We find little impact on the low- or high-skilled service sector or employment in managerial professions. Finally, we show that local labor market conditions prior to the opening matter: in regions with a more dynamic labor market, the opening encourages firm creation and a permanent upskilling of the workforce. Areas with a less dynamic labor market experience little sustained growth in high-skilled workers who are absorbed by incumbent firms