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Do Nasty and Pleasant Surprises Regarding Tax Revenue Explain Spending Drifts? The Case of the Swiss Cantons

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  • Nils Soguel
  • Cécile Ecabert

Abstract

This article aims to explain the difference between the expenditure reported in governmental end-of-the-year budgets and the amounts previously forecasted in the approved beginning-of-the-year budgets. We measure how political, financial, and institutional variables affect this spending drift. We focus on two much-debated factors, namely, tax revenue budgeting errors and the stringency of fiscal rules. Our econometric approach uses a panel based on the 26 Swiss cantons covering the period of 1980 to 2011. Results suggest that stringent fiscal rules discourage budget overruns, whereas underestimating tax revenue—i.e., a budgetary “pleasant surprise”—offers the opportunity for some overspending.

Suggested Citation

  • Nils Soguel & Cécile Ecabert, 2015. "Do Nasty and Pleasant Surprises Regarding Tax Revenue Explain Spending Drifts? The Case of the Swiss Cantons," International Journal of Public Administration, Taylor & Francis Journals, vol. 38(4), pages 282-296, March.
    • Handle: RePEc:taf:lpadxx:v:38:y:2015:i:4:p:282-296
    DOI: 10.1080/01900692.2015.999585
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