Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 685: Protestantism and Government Spending: a Negative Relationship? An Empirical Application to Swiss Cantons

Justina AV Fischer () and Friedrich Schneider ()
Additional contact information
Justina AV Fischer: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, Department of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Friedrich Schneider: Department of Economics, University of Linz, Postal: Johannes Kepler University of Linz, Department of Economics , Altenbergerstrasse 69 , A-4040 Linz Austria

Abstract: Recent empirical growth literature suggests that cultural factors play a decisive role in economic development, while empirical evidence for their impact on government activity remains scant. In this paper, we conjecture based on Weber’s Protestant Ethics that ‚Protestant values’ such as self-reliance and austerity should affect both the size and scope of governments. More specifically, we hypothesize that smaller government budgets should be observable in more Protestant jurisdictions. Using a panel of sub-federal expenditure in 26 Swiss cantons from 1980 to 1998 we find supporting evidence, observing that the share of Protestants in the cantonal residential population exerts a spending dampening impact. Our results suggest that cultural factors should not be omitted from future public finance analyses.

Keywords: Protestantism; Culture; Government Spending; Public Finance

JEL-codes: A13; H30; H72; Z10

26 pages, December 19, 2007

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