Abstract

Tax competition may have a detrimental impact on efficient public goods' supply and redistribution and a positive role in constraining a self-interested government. The Tiebout model considers only the exit option as a means of expressing consumer discontent. Another possibility for voters in a democracy is exerting voice in the decision-making process. This paper analyzes tax competition between the 26 Swiss states in 1990 and considers the impact of referenda to control budgetary decision-making. The results describe the degree of exerting voice in a tax referendum and the feedback on tax competition.

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