Do large cabinets favor large governments? Evidence on the fiscal commons problem for Swiss Cantons

The fiscal commons problem is one of the most prominent explanations of excessive spending in political economics. For a panel of the 26 Swiss cantons over the 1980–1998 periods, this paper explores the role of fragmented governments on fiscal policy outcomes. We distinguish between two variants of fragmented governments: cabinet size and coalition size. In addition, we analyze whether constitutional rules for executive and legislature as well as formal fiscal restraints shape the size of government and how different rules interact with fragmentation. The results indicate that the number of ministers in the cabinet is positively associated with the size of government. While fiscal referendums effectively restrict the size of government, there is also evidence that fiscal referendums relax the fiscal commons problem to some extent.