ABSTRACT
On the eve of the creation of a Swiss federation, Napoleon Bonaparte is reported to have said that Switzerland will be a federal state or it will never be. By acknowledging the cantonal diversity with such resignation, he (supposedly) accepted that the strength of political and cultural identity of the Swiss cantons rendered his attempt to impose a centralized constitution on the Swiss unsuccessful (Kölz 1992). Swiss federalism has since been accepted as one of the most decentralized versions of this type of (vertical) state organization (Filippov et al. 2004). In recent times the fiscal part of Swiss federalism has gained considerable attention by economists (Feld 2000a; Feld and Kirchgässner 2001, 2003). Strong fiscal competencies of the Swiss cantons and local jurisdictions, in particular their extensive tax autonomy, have led scholars to use Switzerland as a laboratory to analyse the effects of fiscal competition on the efficiency of public good provision (Feld 2005a), decentralized income distribution (Feld 2000b; Feld et al. 2003a), government size (Schaltegger 2001; Feld et al. 2003c; Kirchgässner and Feld 2004) and economic performance (Feld et al. 2004).
