Fragmented Governance and Spatial Equity in Metropolitan Areas: The Role of Intergovernmental Cooperation and Revenue-Sharing

Abstract

This article focuses on policies seeking to address social inequalities in metropolitan areas, where the allocation of resources to places with needs often clashes with the politics of redistribution in fragmented local government systems. Scholarship on metropolitan governance has yet to overcome the opposition between proponents of consolidation and defenders of polycentrism. The crucial open question is whether and how intergovernmental cooperation and revenue-sharing can redress spatial equity in institutionally fragmented metropolitan areas. This article addresses this question by exploring the determinants of social expenditures in the 630 municipalities of seven major metropolitan areas in Switzerland, where revenue-sharing systems are common. The analysis shows that intergovernmental grants make a significant but limited contribution to reducing the mismatch between needs and resources in fragmented and decentralized metropolitan areas, depending on the redistributive efforts made by higher state levels.

Keywords

metropolitan governance SSGI (social stratification and government inequality) thesis spatial equity social policy fiscal federalism

Introduction

In the last four decades, global inequalities have increased (Milanovic 2016), and within many developed societies, the distribution of wealth is as unequal again as it was at the end of the nineteenth century (Piketty 2014). Rising levels of social inequality also bring new urgency to policies and institutions that seek to address them. They have revived discussions on the redistributive role of the State, both in politics and academia. The debate prominently focuses on the development, adaptation, and/or threats to the Welfare State, conceived as the set of social policies that organize solidarity and seek to promote equity among individuals belonging to nationwide political communities. This article emphasizes an aspect that is rarely covered in this debate, namely, the spatial dimension of social inequalities and, related to this, the workings of institutions and policies seeking to address them. Theories of social justice traditionally focus on relationships between individuals rather than between places (for a discussion, see Fainstein 2010). But places can cumulate advantages or disadvantages that strongly affect the lives, choices, and opportunities of people who live there. In the United States, for instance, the chances of intergenerational social mobility vary substantially across residential areas, and are strongly associated with place-based characteristics such as residential segregation, income inequality, school quality, social capital, and family structure (Chetty et al. 2015). As spatial disparities shape the structure of social inequality, institutions and policies that mitigate such disparities are thus important to an equitable distribution of wealth in society.

In this article, we assume that locally provided public services play an important role in furthering spatial equity. Note that equity is distinct from equality. While equality means that individuals or groups of individuals all have the same amount of resources, the notion of equity entails that differences in resource levels may be normatively acceptable, as long as they are rooted in differences in need (Boyne, Powell, and Ashworth 2001). The allocation of sufficient resources to places with needs is thus at the core of spatial equity. But this goal often clashes with the politics of redistribution in fragmented local government systems, as localities seek to avoid costly redistributive policies (Buchanan 1971; Peterson 1981). In the literature, two contrasting views on this dilemma can be found. On one hand, an important strand of research shows that, in institutionally fragmented settings, policies that seek to further spatial equity often stand in conflict with local choice. Proponents of this view therefore tend to advocate governmental consolidation and centralization. On the other hand, theories of fiscal federalism have suggested reconciling these contradictions via cooperation and revenue-sharing. Intergovernmental grants, it is argued, allow redistributing resources to jurisdictions with greater fiscal needs, all the while maintaining the benefits of decentralization and local autonomy.

The goal of this article is to discuss these two contrasting arguments, which will be presented in more detail in the next section. More precisely, we will do so on the basis of a study examining the determinants of social expenditures in the 630 municipalities pertaining to the seven major metropolitan areas in Switzerland. The Swiss case is significant for two reasons. On one hand, governmental fragmentation of Swiss metropolitan areas is very high in international comparison (Hoffmann-Martinot and Sellers 2005). On the other hand, Swiss federalism traditionally places strong emphasis on solidarity between subnational entities, and its institutions and practice are generally cooperative and collaborative, rather than competitive. Metropolitan areas in Switzerland thus provide a pertinent empirical context to examine questions of spatial equity in the light of the conflict between local choice and interlocal redistribution. If we can expect to find real-world examples in which this conflict has been overcome, metropolitan areas in Switzerland would be likely candidates. However, as we will show, this expectation is not supported by empirical evidence. While revenue-sharing and intergovernmental cooperation do contribute to mitigating spatial disparities, the territorial mismatch between resources and needs in the fragmented local government system remains significant and is thus a source of spatial inequity. What is more, we find a lack of local policy responsiveness that also questions the decentralization theorem cherished by fiscal federalism.

Equity and Metropolitan Governance: Theoretical Considerations

An increasing majority of the world’s citizen lives in metropolitan areas: functionally integrated city-regions that stretch over a multitude of governmental units (Hoffmann-Martinot and Sellers 2005). The challenges to policy making that result from this process of metropolitanization have sparked a long-running debate about the best way to govern metropolitan areas (for an overview, see Savitch and Vogel 2009). Traditionally, this debate pitted advocates of institutional consolidation and centralized regional systems against proponents of local autonomy and polycentric governance. For a long time, it has fueled disputes over municipal amalgamation, city–county consolidation in the United States, and establishing new scales of government at the metropolitan level. In the 1990s, however, a third perspective emerged which emphasized the role formal and informal networks of intergovernmental cooperation play in solving metropolitan problems (Wallis 1994). This new regionalism takes a more relaxed view about the design of territorial institutions in metropolitan areas, and argues that the routes to regional governance capacity in metropolitan areas can be diverse. As institutional consolidation often proves impracticable, intergovernmental cooperation between autonomous localities or policy networks involving nonstate actors are considered functional equivalents as long as they successfully associate the actors that are relevant to policy making.

Spatial Equity and Governmental Fragmentation: The Social Stratification and Government Inequality (SSGI) Thesis

Matters of equity are a core concern in this long-running debate. The consolidationist position was elaborated as part of the SSGI thesis (see Box 1). This was originally formulated by Hill (1974) and Neiman (1976) based on evidence showing that social inequality in U.S. metropolitan areas was strongly associated with the degree of governmental fragmentation. The SSGI thesis posits that a fragmented governmental setting, due to residential sorting and social segregation, leads to a situation where poor municipalities lack the public resources necessary to address their residents’ needs. In addition, the small size of jurisdictions in fragmented settings enables concentrations of wealthy residents to influence municipal policies so as to reduce redistribution and keep taxes low. The result is a systematic mismatch between resources and needs, whereby income inequalities are perpetuated and even reinforced. A drastic illustration is Massey and Denton’s (1993) American Apartheid argument, according to which the governmental fragmentation of the U.S. metropolis has perpetuated and reinforced racial segregation and poverty among African-Americans. In a similar vein, but more subtly, Downs (1994) pointed to the mechanisms of exclusionary zoning by which small and wealthy jurisdictions use their autonomy to restrict housing choices for disadvantaged groups, thus ensuring that the rich can remain among themselves. Governmental fragmentation of the metropolis, it seems, enables the rich to sort into wealthy municipalities and “shield themselves from observing poverty by the absence of a political forum in which it might be addressed” (Lowery 2000, p. 65). This argument has often informed calls for institutional consolidation through municipal mergers (Rusk 2003) or the creation of strong metropolitan governments (Orfield 2002).

Box 1.

Eight Propositions Derived from the SSGI Thesis.

P1: Families with similar resources, beliefs and habits regarding living patterns will tend to seek residences near one another.
P2: Residents tend to use municipal powers, such as zoning and other land use controls, to enhance the relative fiscal position of the jurisdiction in which they live and the social homogeneity of the neighbourhood in which they live.
P3: Suburban municipalities are consequently divided into many relatively homogenous communities of the poor, the middle class, and the wealthy.
P4: The larger the number of municipal governments in the metropolitan community, the greater the inequality in the distribution of fiscal and other resources among them.
P5: The higher the social status of a jurisdiction, the greater the level of resources available to support public services.
P6: The higher the level of public resources allocated to a service, the higher the level of services received by a population living in a jurisdiction.
P7: Central cities tend to allocate services in favour of the poor.
Thus
P8: Municipal government becomes an institutional arrangement for promoting and protecting the unequal distribution of scarce resources.

Source. Adapted from Ostrom (1983, pp. 94–95).

Note. SSGI = Social Stratification and Government Inequality.

Public choice scholars, who tend to favor fragmented and polycentric metropolitan governance structures, take a different view. Drawing on Elinor Ostrom’s (1983) compelling critique of the SSGI thesis (which she aptly summarized as a set of eight propositions; see Box 1), public choice scholars have viewed governmental consolidation as an inadequate answer to redistributive issues in metropolitan areas. Local autonomy and fragmented government, they argue, improve service responsiveness and are therefore not only beneficial to the rich but also to the poor. In addition, they point out that the problem of fiscal disparities between local jurisdictions can be addressed by transferring fiscal resources to poor localities through intergovernmental cooperation or revenue-sharing:

The SSGI assertion that fragmentation is the cause of inequity in service delivery ignores the role of overlapping governmental units in redistributing resources at county, state, and federal levels to municipalities with a poor resource base. . . . To understand distribution patterns in metropolitan areas, one must examine the compound system and not just one horizontal layer. (Ostrom 1983, p. 93)

The key point is that polycentric systems of governance create institutional opportunities that will eventually foster the emergence of solutions to policy problems by “never-ending processes of experimentation catalysed by public entrepreneurs operating at all scales of organization, from local to national” (Wright, McGinnis, and Ostrom 2011, p. 17). Polycentricity entails an element of self-governance that, in the end, may lead to the adoption of policies suitable to regulate self-interest or solve distributive issues. Whether or not polycentric institutional arrangements reinforce or soothe spatial inequities, therefore, is essentially an empirical question. Examining the role of intergovernmental agreements in fragmented metropolitan settings, but also the role higher state levels play, is central to answering this question.

Fiscal Federalism and the Intergovernmental Dimension of Spatial Equity

The intergovernmental sphere has thus moved to the core of the debate on redistributive issues in metropolitan areas. This nicely relates to the new regionalist turn in the debate on metropolitan governance, entailing a new emphasis on voluntary cooperation and partnerships across a range of different governmental (and nongovernmental) entities within urban regions, instead of jurisdictional consolidation. However, empirical research on the new regionalism has mainly revolved around the economy and efficiency of public services as assets for global competitiveness, rather than around issues of equity and redistribution (Swanstrom 2001). Much European and American scholarship on the new regionalism indeed portends the view that the connection of metropolitan areas into the global economy is beneficial to everyone. One of the core questions left unresolved is the role of intergovernmental cooperation in addressing redistributive issues in urban regions (Jimenez 2014).

The theory of fiscal federalism (see Oates 2011) provides interesting conceptual insights on this question. Fiscal federalists generally agree that policies of income redistribution should be centralized, as the mobility of economic units can seriously undermine attempts by local governments to engage in redistributive policies. As Oates puts it, “an aggressive local program for the support of low-income households, for example, is likely to induce an influx of the poor and encourage an exodus of those with higher income who must bear the tax burden” (Oates 1999, p. 1127). Thus far, fiscal federalism would be in line with the SSGI thesis and the consolidationist perspective on spatial equity.

However, fiscal federalists have found that, notwithstanding fiscal incentives against redistribution at the local level, local governments often play a significant role in social policy making (Craw 2010; Gillette 2011). One reason for this is that local governments are far from fiscally independent: They relate to other governments both horizontally and vertically. Fiscal federalism conceives these relations in terms of intergovernmental grants, that is, transfer payments through which funds can be allocated among different jurisdictions and which, for governments at all levels, constitute an important additional source of revenue beyond tax and debt. Intergovernmental revenues resulting from cooperation or revenue-sharing between localities, as well as between localities and higher level governments thus “may loosen the constraints generated by interjurisdictional competition” (Craw 2016, p. 70) and thereby address the mismatch between resources and needs across different metropolitan places even in fragmented governmental settings.

But why should governmental fragmentation with strong intergovernmentalism be preferred over centralization and institutional consolidation? The answer given by fiscal federalists in more recent work is accountability. In democratic processes, the weight of each individual citizen is inversely proportionate to the number of citizens living in a given jurisdiction. In smaller jurisdictions, elected decision makers can be expected to be more responsive to citizens, and policy outcomes will match preferences better. “Centralisation allows a greater coordination of policies (i.e. the internalization of interjurisdictional externalities), but decentralised decision-making promotes accountability,” writes Wallace Oates, explaining that fiscal federalists prefer decentralization “even if there are homogenous tastes across localities, inasmuch as it enhances local control” (Oates 2005, p. 358). This argument is at the core of the so-called “decentralisation theorem” (Oates 2011, pp. 54–63), stating that, at equal efficiency for decentralized or centralized production of public goods, decentralization is preferable because local autonomy ensures better accountability, meaning a sensitivity of outcomes to preferences. Intergovernmental grants can thus appear as a tool to reduce spatial inequities while maintaining the benefits of local autonomy.

Consolidationists remain skeptic, however, and show little faith in the ability of intergovernmental grants to correct the undersupply of services to the poor in fragmented settings. Lowery, for instance, admits that it is theoretically plausible to assume a role for higher-level governments or voluntary intermunicipal agreements. State governments could indeed decide and enforce redistributive policies, or municipalities could indeed agree on a plan to share their tax base or revenues. But, he argues, this is unlikely to happen:

As a realistic prescription of a practical solution to the problems raised by the SSGI thesis, it leaves much to be desired. . . . [R]edistribution by higher levels of government is an attractive solution to the SSGI problem. So too is the Independence Day notion that an invasion from outer space will erase ancient racial, ethnic, and class divisions as we discover shared interests in a common struggle to kill aliens. It remains unclear which will occur first. (Lowery 1999, p. 16)

The pessimism of consolidationists rests on the assumption that collective action among local governments—for example, through voluntary agreements—must be Pareto-optimal to occur. This makes redistribution between rich and poor localities very unlikely:

Any redress on the part of the poor must overcome the significant transaction costs associated with securing unanimous support from a non-representative metropolitan institution such as a council of government or must seek a venue outside of the metropolitan area at the state or national level. (Lowery 2000, pp. 65–66)

Spatial Equity and Metropolitan Governance: Theoretical Expectations

The insights from fiscal federalism thus help to clarify the main theoretical positions in the debate. On one hand, consolidationist proponents of the SSGI thesis expect fragmented metropolitan settings to go along with a systematic mismatch between fiscal resources and social needs across metropolitan localities. Due to the obstacles in addressing redistributive issues in both interlocal cooperation or through action at a higher state level, they do not expect intergovernmental grants to substantially compensate for this fiscal mismatch. On the other hand, drawing on the insights of fiscal federalism, public choice critics of the SSGI thesis as well as new regionalists would expect that the dynamics of polycentrism found in fragmented metropolitan settings foster the establishment of intergovernmental grants that reduce fiscal disparities between rich and poor localities, ultimately enabling more responsiveness to local needs and preferences.

An empirical assessment of these two positions entails examining the effects of governance arrangements on spatial equity in metropolitan areas, with a focus on the relationship between resources and needs in various localities. Equity does not mean all localities should have the same level of resources. It merely means that those with needs should get what they deserve: “The ratio of spending to needs should be equal across local authority areas, which also implies that there should be a close positive relationship between needs and spending” (Boyne, Powell, and Ashworth 2001, p. 24). In the analysis that follows, we examine the determinants of social expenditures—the spending for policies that address redistributive needs—in municipalities located in fragmented metropolitan institutional settings. On the basis of the theoretical discussion, we can formulate a number of contrasting hypotheses for this analysis:

First, consolidationists and polycentrists diverge over the importance of social needs for redistribution. Proponents of the SSGI thesis argue that because poor communities lack fiscal resources, they are unable to engage in redistribution. Municipalities with extensive social needs are hence not likely to engage in high social expenditures because they simply cannot afford to do so. The hypothesis here is that social expenditures in metropolitan municipalities are unrelated—or even negatively related—to existing social needs. By contrast, polycentrists argue that local authorities are sensitive to local needs and will therefore be more likely to engage in redistributive policies when social needs are extensive. Given the equalizing effect of intergovernmental grants, this will also be possible in communities with less own-source revenues.

Second, consolidationists and polycentrists also diverge about the role of own-source revenues in determining social expenditures in metropolitan municipalities. Proponents of the SSGI thesis argue that the mismatch between resources and needs in fragmented metropolitan settings results from a logic of “to him that hath shall be given more.” They expect rich localities to spend more for redistribution because they have the capacity to do so. The hypothesis flowing from this is that social expenditures in metropolitan municipalities are mainly determined by fiscal resources, particularly own-source revenues. Polycentric detractors of the SSGI thesis would refute this hypothesis as too simplistic, and emphasize the role that intergovernmental grants play in redistributing resources. They thus expect intergovernmental grants to play a crucial role in determining social expenditures in metropolitan municipalities.

Finally, the debate on the SSGI thesis also points to local preferences as a third potentially influential determinant for spending patterns in municipalities. The importance of this variable has been underscored mainly by (fiscal federalist) scholars writing in defense of polycentric governance. Indeed, consolidationists tend to celebrate centralized decision making over preference matching in autonomous localities. The question of how policy choices in the latter context do or do not match citizens’ preferences is of secondary importance to them. But to polycentrists, the responsiveness of local policy choices to citizen preferences is crucial. It is, in fact, their core argument for preferring fragmented institutions and decentralized decision making over consolidation and centralization. Thus, a further hypothesis flowing from the polycentrist position expects that social expenditures in metropolitan municipalities are closely related to political preferences in favor of redistributive policies.

The Swiss Context

Theoretical Relevance

The bulk of existing research on the redistributive effects of institutional arrangements in metropolitan areas has been conducted in the United States (for a recent overview, see Craw 2016). This geographical focus has an important limitation, as it is unclear to what extent findings and conclusions can be generalized. This limitation is particularly evident with respect to the effect of intergovernmental grants, that is, the arrangements of intergovernmental cooperation and revenue-sharing that operate in the multilevel governance compound of metropolitan areas.

True, intergovernmental cooperation between localities is widespread in U.S. metropolitan areas. But empirical evidence shows that the underlying rationale is—as expected by proponents of the SSGI thesis—mainly Pareto efficiency and not redistribution (Andrew 2009; Carr, LeRoux, and Shrestha 2009; Feiock 2009). A recent overview of governance and finance of metropolitan areas in the United States concluded that intergovernmental cooperation in U.S. metropolitan areas was mostly limited to providing regional infrastructure, services, or public goods but did not involve redistribution (except to some extent for school districts) (Vogel and Imbroscio 2013). Similarly, while intergovernmental transfers do play a role within U.S. states, most of these payments are part of state policy programs. When local governments in U.S. metropolitan areas engage in redistribution by spending a significant share of their budget on social policies (mainly in health and welfare), they are heavily dependent on own-source revenues—taxes, property taxes, user fees, and the like. Intergovernmental revenue-sharing is extremely limited: The Twin Cities (Minnesota) are reportedly the only major U.S. metropolitan area to feature a metropolitan-wide tax-base sharing system (Orfield and Luce 2010). For the debate on the distributive consequences of metropolitan governance arrangements, it is therefore high time to study cases outside of the United States—which is what we do in this article.

Focusing on the major metropolitan areas in Switzerland, we explore the relationship between patterns of municipal needs and fiscal resources on one hand, and the level of social expenditures in metropolitan municipalities on the other hand, while accounting for the effects of intergovernmental grants in reallocating fiscal revenues. The seven Swiss metropolitan areas under scrutiny provide a setting with important similarities and also differences to the U.S. context. Swiss metropolitan areas are similar to their U.S. counterparts in that they are characterized by high institutional fragmentation (Hoffmann-Martinot and Sellers 2005). Local government systems in both countries are also similar in terms of local government capacities and supervision by higher state levels (Sellers and Lidström 2007). But Swiss and U.S. metropolitan areas differ inasmuch as Swiss federalism is oriented more toward solidarity and cooperation, and less to the kind of competition found in U.S. federalism. This echoes the distinction between the “integrated” and “dualist” types of federations to which the two countries, respectively, belong (Anderson 2010, p. 12). Intergovernmental cooperation and revenue-sharing are crucial features of Swiss federalism, and their importance has increased in the last decade (Koch and Kübler 2011). Indeed, such cooperation and revenue-sharing are operational since the mid-twentieth century in all seven metropolitan areas under scrutiny here (for more details, see the Supplementary Material published online).

Metropolitan Areas in Switzerland: Extension and Institutional Structure

Switzerland has been profoundly urbanized over the last century (Bassand 2005), leading to the functional integration of large urbanized territories, but at the same time to social segregation within them. Among the 48 functional metropolitan areas¹ delimited in the latest available official definition from the 2012 Population Census (Bundesamt für Statistik 2014), seven have a population close to or more than 200,000 inhabitants. These are the metropolitan areas of Zurich, Basel, Geneva, Bern, Lausanne, Lucerne, and Lugano (see Table 1), which are the basis for the subsequent analysis. Taken together, they include 630 municipalities and contain roughly 3.4 million inhabitants, corresponding to roughly 55% of the country’s urban population.

Table 1.

Demographic and Institutional Structure of Seven Major Swiss Metropolitan Areas (2012).

Metropolitan Area	Overall Population	Number of Municipalities	Municipalities per 10,000 inhabitants	Cantons Included
Zurich	1,246,210	152	1.2	ZH, AG, SZ, SH
Basel^a	524,764	107	2.0	BS, BL, SO, AG
Geneva^a	546,222	88	1.6	GE, VD
Bern	381,465	77	2.0	BE, FR
Lausanne	366,996	132	3.6	VD, FR
Lucerne	215,251	19	0.9	LU, NW
Lugano^a	143,757	55	3.8	TI
Overall	3,424,665	630	2.15	14

Source. Swiss Statistical Office, Population Census Data.

Excluding foreign municipalities in cross-border metropolitan areas. AG = Aargau; BE = Bern; BL = Baselland; BS = Basel-Stadt; FR = Fribourg; GE = Genève; LU = Luzern; NW = Nidwalden; SH = Schaffhausen; SO = Solothurn; SZ = Schwyz; TI = Ticino; VD = Vaud; ZH = Zürich.

In contrast to most countries of Northern Europe, the local government structure in Switzerland has not been subject to comprehensive territorial reforms in the twentieth century. Municipal amalgamations have taken place incrementally and sporadically. As a consequence, municipalities are small and suburbanization is high. This is reflected in the number of municipalities per 10,000 inhabitants, a proxy for governmental fragmentation. Another feature of governmental fragmentation in Swiss metropolitan areas is that they often transcend boundaries of the cantons. Six of the seven metropolitan areas examined here have municipalities located in more than one canton. Altogether, the metropolitan municipalities under scrutiny in this article are located in 14 different cantons (see Table 1).²

Swiss Fiscal Federalism

Switzerland is a federalist state with three levels of government: the national (Bund), state (26 Kantone or cantons), and local (roughly 2,400 Gemeinden or municipalities). Swiss federalism is “decentralised” due to the strength of the cantons and the relative weakness of the national government, not only in terms of legal competencies but also in terms of fiscal resources and implementation power (Braun 2003). Constitutionally, Swiss municipalities have no independent power, as their autonomy is subject to cantonal legislation both in terms of legal competencies and fiscal resources. But in general, and compared with other federations, local autonomy is quite high in Switzerland, and decentralization and subnational autonomy have long been seen as crucial ingredients to national cohesion in a multicultural society.

Swiss federalism has been characterized as less competitive and more collaborative than its U.S. counterpart (Linder 2010). Nevertheless, competitive elements are present, resulting most notably from the principle of tax autonomy at all three levels of government, which has been enshrined since the foundation of the Swiss federation in 1848. The national, cantonal, and municipal governments each have the right to raise their own taxes on income and property. This tax autonomy has sparked fiscal competition at the subnational level, and it has become a characteristic feature of Swiss federalism. Fiscal competition between cantons has led to the emergence of a wide range of different cantonal tax regimes. In addition, there is fiscal competition between municipalities within cantons, and municipal tax rates differ quite substantially. These features of decentralization and subnational competition are reflected in public finance figures (Eidgenössische Finanzverwaltung 2012). In 2010, the share of the cantons in overall public expenditures was 42.3%, considerably higher than that of the national government (33.6%) or of the municipalities (24.1%). On the revenue side, the cantons also have the lion’s share (42.2% of overall public revenues), compared with the national government (34.5%) or the municipalities (28.4%). The collaborative element in Swiss federalism entails widespread intergovernmental cooperation and revenue-sharing—both vertically and horizontally. For 2010, a large proportion of cantonal revenues (29.7%) stemmed from transfer payments not only from the national government but also from other cantons. Intergovernmental grants were also an important feature of municipal finance: Transfer payments account for more than a quarter of municipal expenditures (28.4%), as well as for a substantial part of municipal revenues (12.6%). Well in line with the theory of fiscal federalism, intergovernmental grants follow two distinct rationales.³ On one hand, transfer payments are linked to numerous mechanisms for intergovernmental cooperation, co-decision, and co-financing, not only vertically across levels of government but also horizontally between jurisdictions at the same level (Bochsler 2010; Klöti 2000). On the other hand, transfer payments are at the core of revenue-sharing schemes set up in the mid-twentieth century to counteract fiscal imbalances at the subnational level. Revenue-sharing schemes exist both at the national level (between cantons, as well as between cantons and the federation) as well as within cantons (between municipalities, as well as between municipalities and their canton). On the whole, intergovernmental cooperation and revenue-sharing are found to have kept tax competition in check, as yet there is no evidence for a ruinous race to the bottom (Gilardi, Kübler, and Wasserfallen 2013).

The academic interest in issues related to metropolitan governance in Swiss fiscal federalism began relatively late. In the beginning, the focus was on the exploitation of core cities by suburbs, resulting from spillover effects related to public infrastructure, or services which are of interest to the whole metropolitan area but essentially catered for by the core cities (Frey 1988; Walter and Amacher 2013). Some studies focused on intermunicipal tax competition within Swiss metropolitan areas, and showed that spillover effects distort it and have contributed to income sorting and social segregation (Schaltegger, Somogyi, and Sturm 2011). Other studies investigated the proliferation of intermunicipal cooperation arrangements set up to coordinate public policies on a larger scale, emphasizing that these mechanisms increase intergovernmental entanglement and coordination problems, and have accountability deficits that threaten policy responsiveness (Kübler and Schwab 2007; Plüss 2015). Remarkably, however, distributive and equity issues related to metropolitan governance thus far have not been a major focus of scholarly interest. Beyond its theoretical interest, this article therefore also aims to contribute to an improved understanding of the distributive consequences of metropolitan institutional arrangements in Switzerland.

Data and Method

To assess the determinants of redistributive expenditures in metropolitan municipalities in Switzerland, we implement a cross-sectional research design focusing on the 630 municipalities that make up the seven major Swiss metropolitan areas (see Table 1). Due to limited accessibility of data on municipal public finance in Switzerland, efforts for data collection were considerable, and data could be collected only for one time point. Ideally, longitudinal data should be used for the study of fiscal outcomes. Nevertheless, given the exploratory nature of the present study—which is the first ever to collect, compare, and analyze fine-grained financial data on such a large number of Swiss municipalities located in different cantons—we think that a cross-sectional design is appropriate.

Data Sources and Operationalization of Variables

The analysis aims to single out the influence of fiscal resources, social needs, political preferences, and intergovernmental grants on redistributive expenditures in Swiss metropolitan municipalities. Data on these variables were collected for 2010 (or nearby years, as available) from official sources (for details, see the methodological appendix in the Supplementary Material available online). Data on geographic variables, sociodemographics, and election results are based on definitions standardized at the national level and are therefore readily comparable across municipalities. Municipal public finance figures are not based on national standards, and comparability is an issue. Efforts to standardize public-sector accounting across Switzerland date back to the early 1980s and, as of 2008, were strengthened with the publication of new guidelines based on International Public Sector Accounting Standards.⁴ However, while most cantons and municipalities present accounts which follow common principles, differences across cantons remain. Hence, municipal budget data had to be carefully checked to ensure consistent classification of public finance data, especially for municipal revenues from transfer payments, as well as for municipal expenditures for social policies. This check resulted in the exclusion of public finance data from seven municipalities located in three cantons (Basel-Stadt [three municipalities], Schwyz [three municipalities], and Nidwalden [one municipality]).

Operationalization of the dependent variable: Social expenditures in metropolitan municipalities

To measure policy efforts to address redistributive issues in metropolitan municipalities, we assume these efforts are a function of public expenditures for social policies within these municipalities. In Swiss federalism, all three levels of government are engaged in social policies. The national government is responsible for the nationwide social security system (old age, disability, unemployment, health) which is uniform across the entire country. The cantons, too, are important providers of social policies: All cantons taken together account for a share of social expenditures (38.8% of overall social expenditures) that is almost equal to that of the national government (41.1%). But there is considerable variation across cantons. Relative to expenditures by all the municipal governments within the same canton, the cantonal share in social expenditures in the14 cantons under scrutiny here is very high in the cantons of Basel-Stadt (97.7%) and Nidwalden (90.0%), as well as Geneva (86.0%), but very low in the canton of Zurich (42.6%). In the remaining cantons, the cantonal share of social expenditures lies between 60% and 80% (Lucerne: 59.4%, Solothurn: 60.0%, Schwyz: 62.8%, Bern: 63.4%, Aargau: 64.1%, Schaffhausen: 64.2%, Vaud: 67.5%, Basel-Land: 70.9%, Fribourg: 76.9%, and Ticino: 78.1%) (Eidgenössische Finanzverwaltung 2012).

In spite of the national and cantonal governments’ predominance in social policies, municipalities are important, too (see Höpflinger 1994). Overall, they account for 20.1% of social expenditures in the country and can decide rather autonomously about how to allocate this share.⁵ Most significantly, municipalities are autonomous in the field of social welfare, entailing monetary and other benefits to households that live below the poverty line. They also provide a range of services to various socially disadvantaged target groups (such as child day care, social housing, homes for the elderly, integration programs for migrants, etc.) and often do this in cooperation with neighboring municipalities. In addition, municipalities play an important role in the implementation of cantonal social policies. For instance, they administer the payment of benefits related to cantonal social policy schemes, they operate services defined by cantonal legislation and funded by the canton, and they participate in cantonal social policy programs addressing social problems of a variety of target groups (e.g., long-term unemployed, youth, elderly, asylum seekers, etc.). As we know since Pressmann and Wildavsky’s (1973) classic piece, implementation is not simply a neutral application of policy decisions taken by other governments, but a process with some discretion to influence policy substance. In the multileveled, intergovernmental framework of social policy making in Switzerland, the municipalities thus have a crucial role.

Municipal social expenditures, reported in municipal financial statements, are a good measure for this role. Indeed, according to the accounting guidelines published by the Swiss Public Sector Reporting Advisory Committee (Konferenz der kantonalen Finanzdirektorinnen und Finanzdirektoren 2008), expenditures subsumed under this category cover social policy efforts quite comprehensively. However, not only expenditures decided autonomously by the municipal government but also those related to the implementation of cantonal social policies are booked into this category.⁶ While the former can be expected to vary across municipalities, this is less likely for the latter, as all municipalities within one canton will be submitted to the same cantonal social policy framework. However, given the differences of social policy between cantons, the part related to cantonal social policy efforts in municipal expenditures is likely to vary across the different cantons. Hence, for the purpose of the multivariate analyses, we use z-score transformation to standardize this value within each of the cantons covered in this study.

Operationalization of independent variables on social needs

Social needs in a municipality can be defined as a function of the share of groups in the municipal population in need of financial assistance due to the absence of (sufficient) income from occupational activity. A first measure is the municipal unemployment rate, meaning the percentage of the occupationally active population that is currently seeking a job and is registered with the unemployment insurance scheme. As a second measure of social needs within a municipality, we use the percentage of the municipal population entitled to social welfare benefits, that is, living below the poverty line.

While these first two variables aim at measuring the presence of social hardship, we account for the absence of social hardship in a municipality by using the taxable income of the municipal population. More precisely, we use “equivalent taxable income” as calculated by the Federal Finance Administration, a number that takes into account differences in taxpayers’ household sizes. And to avoid outlier effects, we use the municipal median.

Operationalization of independent public finance variables

The availability of fiscal resources in a municipality was operationalized as own-source municipal revenues, meaning the income generated from local taxes and fees, and measured in Swiss francs per capita of the municipal population. Given municipal tax autonomy in Switzerland, fiscal resources are not only a function of the income of municipal taxpayers but also vary according to municipal tax effort, operationalized as the municipal tax rate indexed to the cantonal mean.

Municipal revenues from intergovernmental grants were drawn from municipal financial statements, taking into account the differences in municipal accounting standards across cantons (see Table S1 in the Supplementary Material for details). Due to these different accounting standards, only the aggregated volume of overall intergovernmental transfer revenue is comparable across municipalities. Unfortunately, this operationalization does not allow distinguishing between purpose-specific transfers related to intergovernmental cooperation (vertical and/or horizontal) and block-grant transfers related to revenue-sharing schemes (tax-base sharing or compensations). Nevertheless, it is an accurate measurement for the overall importance of intergovernmental grants in a municipal budget. As we show in the Supplementary Material, it can be assumed that transfers from revenue-sharing schemes play the most important role for explaining the observed variance of the dependent variable.

Revenue-sharing schemes were set up by all Swiss cantons in the second half of the twentieth century (see Rühli, Frey, and Frey 2013). Their core objectives are to redistribute fiscal resources from rich to poor municipalities, as well as to compensate unequal burdens on municipal budgets due to specific geographic or social conditions. However, the characteristics of revenue-sharing schemes as well as the extent to which they redistribute resources between municipalities vary substantially across cantons (see Table S2 in the Supplementary Material). We can therefore expect that the relationship between fiscal resources and social needs in a given metropolitan municipality varies according to the extent of redistribution built into the revenue-sharing system of the canton to which this municipality belongs. This influence can be controlled for by taking into account the strength of the cantonal revenue-sharing system, that is, the extent to which fiscal revenues are shared among municipalities within one canton. Drawing on a recent overview of revenue-sharing systems within Swiss cantons, we operationalize this as the percentage of municipal fiscal resources that are redistributed between municipalities within each canton (Rühli, Frey, and Frey 2013).

Operationalization of political preferences for redistribution

As we have seen, the polycentrist position on metropolitan governance as well as fiscal federalist theory emphasize the responsiveness of municipal governments to residents’ preferences. To measure popular preferences for redistribution at the municipal level, we use the share of votes for left parties in the national elections held in 2011, meaning the cumulated percentage of votes for the Social Democrats, the Greens, the Christian Socialist Party, the Workers’ Party, as well as SolidaritéS. As postelection surveys show, voters for these parties strongly support income redistribution and social investment, and can thus be considered to favor expansive social policies (Fossati and Häusermann 2014). To take differences across cantons into account, the shares of votes for left parties were centered to the cantonal mean.

Method

Aside from descriptive and bivariate statistics, our analysis uses multilevel regression analysis. Given the hierarchical structure of the data (municipalities are nested within cantons), two-level models were fitted (municipalities at level 1 and cantons at level 2) with random intercepts at the level of the cantons. To limit estimation problems due to the relatively small number of level 2 units, we used restricted maximum-likelihood estimation as recommended by Steenbergen and Jones (2002). Analyses were undertaken using R.

Findings

Findings will be presented in three steps. In a first step, we explore the territorial distributions of our variables of interest in the seven metropolitan areas. In a second step, we focus on different types of metropolitan municipalities to develop a closer understanding of the geographies of social needs, fiscal resources, political preferences, and social expenditures in Swiss metropolitan municipalities. In a third step, we use multivariate analysis to single out the determinants of redistributive policies in metropolitan municipalities.

Social Needs, Fiscal Resources, Political Preferences, and Social Policy Effort in Metropolitan Areas

Population-weighted Gini coefficients were calculated to characterize the distribution of each variable in the seven metropolitan areas. The theoretical values of these Gini coefficients range from 0 to 1. The closer to 0, the more the distribution of a given variable corresponds to equality, meaning that all municipalities in a metropolitan area have equal shares of this variable. The results show considerable differences in territorial distributions not only between the variables of interest but also across single metropolitan areas (see Table 2).

Table 2.

Territorial Distribution of Social Needs, Fiscal Resources, Political Preferences, and Social Expenditures Across Metropolitan Municipalities, Population Weighted Gini Coefficients (Data for 2010).

Variables	Lucerne	Zurich	Bern	Geneva	Basel	Lausanne	Lugano
Unemployment	0.176	0.145	0.184	0.151	0.141	0.197	0.157
Social welfare recipients	0.177	0.306	0.200	0.261	0.293	0.358	0.236
Income	0.622	0.649	0.707	0.783	0.703	0.777	0.624
Municipal revenues from own sources	0.139	0.353	0.167	0.211	0.113	0.271	0.209
Municipal tax effort	0.607	0.648	0.731	0.732	0.613	0.771	0.644
Municipal revenues from transfers	0.546	0.410	0.370	0.314	0.367	0.258	0.251
Votes for left parties	0.464	0.616	0.648	0.709	0.689	0.743	0.648
Overall social expenditures in municipalities	0.132	0.314	0.226	0.324	0.226	0.170	0.302

With respect to social needs, it appears that unemployed persons are more equally distributed across metropolitan municipalities than are social welfare recipients. Income is distributed quite unevenly, too, indicating that spatial inequalities in affluence are more pronounced in Swiss metropolitan areas than spatial inequalities in social hardship. These figures suggest social segregation exists across metropolitan municipalities, and it is especially pronounced in the metropolitan areas of Lausanne, Zurich, Basel, and Geneva.

Owing to segregation, there is also an uneven distribution of fiscal resources across metropolitan municipalities, especially in the metropolitan areas of Zurich and Lausanne. The high Gini coefficients of municipal tax efforts point to the differences of tax rates between wealthier and poorer municipalities in all metropolitan areas. But municipalities are also distinct in terms of revenues they receive from transfer payments, which underscores the importance of intermunicipal fiscal equalization schemes in Swiss metropolitan areas, especially in Geneva. Metropolitan municipalities are also distinct in terms of their citizenry’s political preferences for social policies, with polarization particularly deep in the metropolitan areas of Lausanne and Geneva. Finally, territorial inequalities also exist with respect to social policy efforts undertaken by metropolitan municipalities, and they are particularly pronounced in the metropolitan areas of Zurich, Lugano, and Basel.

Interestingly, and contrary to one of the core assumptions of the SSGI thesis, the territorial distributions of social needs, fiscal resources, political preferences, and social policy efforts in these metropolitan areas are unrelated to the degree of institutional fragmentation. Metropolitan areas in Table 2 are ordered according to the fragmentation of their government structures, Lucerne being the least fragmented, Lugano the most. However, Gini coefficients are not systematically higher to the right of the table.

The Gini coefficients in Table 2 allow a first exploration of existing territorial inequalities in Swiss metropolitan areas. As such, however, territorial inequalities of social needs, fiscal resources, political preferences, and social policy efforts are not necessarily a good measure of spatial inequities. Equity is not a question of equal distribution but rather a question of equal matching of resources to needs. Hence, we need to take a closer look at the places with higher needs and see whether this goes along with the allocation of more resources.

The Geography of Social Needs and Fiscal Resources in the Swiss Metropolis

Existing studies show that residential segregation across municipalities in Swiss metropolitan areas has increased toward the end of the twentieth century, not only with respect to social status (mainly income) but increasingly with respect to lifestyle choices (Hermann, Heye, and Leuthold 2005; Huissoud et al. 1999). Patterns of residential segregation in Swiss metropolitan areas do not simply set off the core cities from the suburbs, but social disparities also exist across the suburbs. These patterns are captured by the typology of Swiss municipalities used by the Swiss Statistical Office, one that distinguishes between four types of municipalities in Swiss metropolitan areas: core cities, inner suburbs located close to the core cities, affluent suburbs characterized by beautiful settings and expensive housing, as well as periurban suburbs located at the outskirts of the metropolitan areas.⁷

Table 3 shows that these four types of municipalities are distinct not only with respect to their size and location, but they also differ significantly in terms of social needs, fiscal resources, political preferences, and social policy effort.⁸ In terms of social needs, core cities and inner suburbs appear to have higher needs compared with affluent and periurban suburbs. Indeed, both unemployment and social welfare rates are higher in core cities than in the suburban municipalities. Median income levels show that affluent suburbs are populated by very wealthy residents, while core cities, on average, are home to poorer households.

Table 3.

Social Needs, Fiscal Resources, Political Preferences, and Social Policy Effort in Municipalities of the Seven Major Swiss Metropolitan Areas, by Type of Municipality.

Variables	Core Cities	Inner Suburbs	Affluent Suburbs	Periurban Suburbs	Overall
Unemployment (% seeking job)
Mean	3.3	2.6	2.0	1.8	2.1
SD	1.1	0.8	0.6	1.0	1.0
Social welfare (% with benefits)
Mean	5.2	2.9	1.0	1.3	1.7
SD	2.4	1.6	0.9	1.1	1.5
Median income equivalent (in 1,000 SwisFrancs)
Mean	34.32	36.855	50.266	37.364	38.633
SD	2.047	4.146	8.040	5.693	6.978
Municipal revenues from own sources (in 1,000 Swiss Francs per capita)
Mean	9.713	4.515	6.536	4.065	4.510
SD	4.603	1.751	3.138	2.409	2.541
Municipal tax effort (tax rate index)
Mean	97.8	95.3	83.2	98.9	96.2
SD	13.9	11.4	15.5	11.7	13.0
Municipal revenues from transfers (in % of overall revenues)
Mean	11.4	12.6	5.3	15.7	13.7
SD	8.7	8.3	4.5	11.8	10.8
Vote for left parties (in %, centered to cantonal mean)
Mean	18.7	3.7	−3.0	0.3	0.9
SD	10.5	5.7	5.8	6.8	6.9
Social expenditures in municipality (in 1,000 Swiss Francs per capita)
Mean	1.972	1.148	1.262	0.800	0.954
SD	1.037	0.623	1.031	0.597	0.701
Population
Mean	158,624	8,781	4,487	1,440	5,436
SD	104,608	7,206	4,450	1,445	19,883
Observations	7	164	70	389	630

The four types of municipalities are also distinct in terms of fiscal resources. Municipal revenues from own sources are higher in the core cities and the affluent suburbs—albeit for different reasons. Core cities generate higher revenues from business tax because of higher concentration of businesses in central locations. Core cities also extract more taxes from their residents, as is shown by the higher tax effort. Affluent suburbs, in contrast, generate high revenues at a low tax effort, mainly thanks to the presence of very wealthy taxpayers. As a corollary, they also receive less revenue-sharing payments, as is shown by the smaller share of transfer revenues in their municipal budgets.

The average share of votes for left parties in the 2011 national elections shows quite distinct political preferences across the four types of municipalities. Voters of the core cities have the strongest preferences for expansive social policies, those in affluent suburbs the least.

Finally, the four types of municipalities differ with respect to social expenditures—our dependent variable. Core cities have significantly higher per capita social expenditures than suburbs. Among the different types of suburbs, inner suburbs have the highest per capita social expenditures, periurban suburbs the least, with affluent suburbs in between.

The bivariate analysis allows a first tentative answer to the equity question, that is, whether fiscal resources are adequately matched with social needs in metropolitan municipalities. Findings for the core cities suggest a positive relationship between fiscal resources and social needs there. Social needs in core cities are high, but so are own-source municipal revenues, which are topped up by transfer payments. With political preferences clearly leaning toward expansive social policies, the result is a rather high level of social expenditures in these places. On the contrary, findings for the suburban municipalities indicate a mismatch between fiscal resources and social needs. In the suburban zone of Swiss metropolitan areas, social expenditures are astonishingly high in affluent suburbs, although indicators for social needs show low values. Transfer payments are an important revenue source for less well-off municipalities, but do not suffice to compensate for the lack of own-source revenues, resulting in higher tax efforts.

Determinants of Social Expenditures in Metropolitan Municipalities in Switzerland

Beyond the bivariate results, multivariate regression analysis allows a more fine-grained understanding of the relationship between social needs, fiscal resources, political preferences, and social expenditures in Swiss metropolitan municipalities. Four different models were estimated (see Table 4).⁹ The first three models estimate the effects of variables measuring social needs, fiscal resources, and political preferences separately. The fourth model includes all the independent variables. To avoid multicollinearity, some confounded independent variables had to be omitted from the analysis.¹⁰

Table 4.

Predictors of Per Capita Social Expenditure (z-Score per Canton) in Metropolitan Municipalities (Mixed-Effects Linear Regressions).

Independent Variables	Model 1: Social Needs	Model 2: Fiscal Resources	Model 3: Political Preferences	Model 4: Full
Fixed part
Variables at level 1 (municipality)
Unemployment (% seeking job)	0.173*** (0.045)			0.088* (0.042)
Social welfare (% with welfare benefits)	0.170*** (0.030)			0.208*** (0.028)
Own-source municipal revenues (per capita, in 1,000 Swiss Francs)		0.218*** (0.017)		0.211*** (0.016)
Transfer revenues (% of overall municipal revenue)		0.042*** (0.011)		0.044*** (0.011)
Votes for left parties in 2011 (mean-centered per canton)			0.012* (0.006)	−0.006 (0.005)
Variables at level 2 (canton)
Strength of cantonal redistribution regime		1.320* (0.564)		1.317* (0.573)
Constant	−0.516*** (0.096)	−1.227*** (0.155)	0.103* (0.051)	−1.685*** (0.164)
Cross-level interaction
Transfer Revenues × Strength of Cantonal redistribution regime		−0.143*** (0.039)		−0.160*** (0.038)
Random part
Variance cantonal level	1.24 × 10^-7	0.004	0.005	0.008
Variance municipal level	1.015	0.795	1.120	0.691
Number of cantons	11	10	11	10
Number of municipalities	611	612	616	606
Deviance test	71.505***	216.24***	3.954*	304.28***
Intraclass correlation	1.22 × 10^-7	0.00499	0.00486	0.0109

Note. The table entries are restricted maximum-likelihood estimates, with estimated standard errors in parentheses. Significance tests of random parts based on profile likelihood.

p < .05. **p < .01. ***p < .001.

Regarding the influence of social needs, the results of the first model show that social needs do play a significant role in explaining social policy effort in Swiss metropolitan municipalities. Indeed, overall social expenditures in metropolitan municipalities are positively associated with rates of unemployment and social welfare recipients.

The second model estimates the influence of fiscal variables on the dependent variable. Note that there is a logical link between the strength of the cantonal redistribution regime and the share of transfer revenues in the municipal budget: The more redistributive a cantonal revenue-sharing regime, the higher the share of transfer revenues in municipal budgets. A cross-level interaction term was used to take this effect into account. Results of the second model show that the availability of fiscal resources determines the level of social expenditures in metropolitan municipalities to a large extent. Not only own-source revenues but also revenues from transfer payments have a positive effect, indicating that revenue-sharing has an effect (see also the additional analysis on this point in the Supplementary Material). Finally, the strength of the cantonal revenue-sharing regime is a significant predictor: Municipalities have higher social expenditures when they are located in cantons whose revenue-sharing regime is strongly redistributive.

The third model estimates the effect of political preferences at the municipal level on social expenditures. It shows that social expenditures in metropolitan municipalities are, as expected, positively associated with the vote for left parties by the municipal electorate.

Finally, the full model shows that the effects identified in models 1 and 2—but not model 3—are quite robust. The level of social expenditures in a metropolitan municipality is not only influenced by social hardship (the presence of needs) but also by the availability of fiscal resources (the availability of own-source revenues). Intergovernmental grants also play an important role, as is shown not only by the positive effect of the share of transfer payments in the municipal budget but also by the positive effect of strong cantonal revenue-sharing regimes. However, the influence of the left party vote is explained away by the other variables. The level of social expenditures in a metropolitan municipality is thus not associated with political preferences of the municipal electorate.

Overall, it appears that social policy efforts are related to social needs in Swiss metropolitan areas to some extent, but this crucially depends on the ability of a municipality to actually generate the revenues necessary to afford social policies—be that because it can extract resources from its tax base or because it benefits from transfer payments from other jurisdictions. Political preferences for expansive social policies are only weakly associated with social policy efforts in metropolitan municipalities. These findings indicate that in Swiss metropolitan areas, certain amounts of public resources are indeed allocated to places with social needs, but that these needs are covered in a more comprehensive way when a municipality is affluent. This finding points to serious limitations of the revenue-sharing regimes in terms of ensuring spatial equity. In spite of substantial intergovernmental transfers, own-source revenues remain significant predictors of social policy efforts in Swiss metropolitan municipalities. Spatial equity would entail this relationship to be reversed.

Discussion and Conclusion

The aim of this article was to deepen our understanding of the distributional consequences of metropolitan institutional arrangements, by paying a particular attention to the intergovernmental nexus that has been neglected in much of the existing literature. Drawing on empirical data from 630 municipalities in the institutionally fragmented and decentralized setting of seven major Swiss metropolitan areas, we tested contrasting hypotheses derived from two distinct theoretical models of metropolitan governance. From the perspective of the consolidationist, neoprogressive reform model, we expected to find a systematic mismatch between social needs and fiscal resources in metropolitan municipalities, with intergovernmental grants largely insignificant in helping to overcome or compensate this mismatch. From the polycentrist perspective advocated by public choice theorists and fiscal federalists, we expected to find redistributive expenditures in metropolitan municipalities to be positively related to social needs and responsive to local preferences, thanks to intergovernmental grants that ensure supply of fiscal resources.

Neither of these theoretical models is fully supported. Rather, our findings suggest that both models need qualifications. With respect to the consolidationist perspective, our findings provide evidence that buttress some of the core assumptions of the SSGI thesis. In the fragmented and decentralized institutional setting of Swiss metropolitan areas, social segregation—especially of high-income households—across metropolitan municipalities has resulted in unequal levels of fiscal revenues. Simultaneously, own-source fiscal revenues are important predictors of redistributive efforts in metropolitan municipalities, independent of existing social needs in that municipality. The empirical situation in Swiss metropolitan areas therefore reflects the image drawn by proponents of the SSGI thesis, according to which institutional fragmentation and decentralized governance contribute to spatial inequity, in that it “enables the rich to lock up their money and resources in the wealthy suburbs, leaving the rest to manage as best they can with their smaller tax bases and greater demands on public services” (Newton 2012, p. 415). But a closer look at the Swiss case makes clear that some other assumptions by SSGI proponents are overstated. Most significantly, our analysis shows the importance of intergovernmental grants related to policy-oriented cooperation or revenue-sharing. Transfer payments are an additional source of revenue for metropolitan municipalities and crucial to redistributive policy efforts. Even if, at the end of the day, suburbs with wealthy taxpayers can afford to spend more on social policies and often chose to do so, strong cantonal revenue-sharing regimes do have a moderating effect on spatial inequities. Intergovernmental grants contribute to compensating the mismatch between resources and needs across metropolitan municipalities—especially when they are linked to strong cantonal revenue-sharing schemes.

But our findings are also in line with some of the core assumptions made by advocates of the polycentric model. Social expenditures in metropolitan municipalities are related to existing social needs: Places with more social needs also have higher levels of social expenditures. And the nexus of intergovernmental cooperation and interventions from higher levels of government ensures that fiscal resources are redistributed so that places with less own-source revenues receive some supplementary means to engage in social policy efforts. Contrary to the expectations formulated by both polycentrists and fiscal federalists, however, we did not find strong evidence for social policy efforts in metropolitan municipalities being conditioned by local electorates’ political preferences. A clear correlation between left voting and high social expenditures was only found for the core cities, but was not confirmed for suburban municipalities in which the bulk of the metropolitan population lives. This finding is theoretically significant as it goes against the decentralization theorem. Indeed, fiscal federalists argue that decentralization is per se preferable to centralization because local autonomy automatically ensures better accountability, meaning a sensitivity of outcomes to preferences (Oates 2005). The governance arrangements in the metropolitan areas under scrutiny in this study correspond quite neatly to the precepts of decentralized governance, but we find no strong evidence for policy responsiveness in metropolitan municipalities.

Of course, this study also has limitations. Beyond the problems related to collecting sufficiently fine-grained data on the public finance variables of interest, the availability of data for one single year only makes it impossible to disentangle the endogeneity issues that come along with analyzing social policies at the local level. Further research should thus focus on collecting not only better public finance data but also data for several time points, to test the robustness of our findings on the basis of longitudinal analyses. Another weakness of this study is that it does not address spatial autocorrelation of data on local expenditures owing to interjurisdictional competition (see Minkoff 2009). This was mainly due to the methodological complexities involved by the specification of spatial lag models with data on municipalities located in different cantons—a point that could also be addressed in further research.

These limitations notwithstanding, the findings of this study underscore the role of the intergovernmental nexus in shaping spatial equity in metropolitan areas. This topic was raised by new regionalists a while ago, conjecturing on the possibility that intergovernmental cooperation and tax-base sharing in fragmented metropolitan settings could help address issues of redistribution. Their conjecture was received with widespread skepticism, notably by defendants of the consolidationist position (Howell-Moroney 2008), but remained understudied to date. Indeed, revenue-sharing systems are extremely rare in the United States, and the possibilities to empirically assess their effects are limited. Our study on Swiss metropolitan areas, where such arrangements are common, therefore contributes to this debate. More precisely, our findings suggest that intergovernmental cooperation and revenue-sharing have an effect on local social policy efforts and therefore do contribute to matching resources to needs in metropolitan areas. The institutional setting of Swiss metropolitan areas bears many resemblances to the polycentrist ideal. But this multilevel compound of fragmented institutions and decentralized governance has obviously offered opportunities for redistributive efforts by local governments: Our study has found tieboutanism tamed by intergovernmental cooperation and revenue-sharing that result in some—even though not full—compensation of spatial inequities.

The implication for the debate on metropolitan governance in the United States is that the issue of spatial equity should be no longer discussed solely in terms of institutional consolidation versus fragmentation. Our study shows that, to understand the redistributive effects of metropolitan governance arrangements, a more nuanced perspective is warranted—one that takes into account the workings of the multileveled, compound system of metropolitan governance, that function as “place equality regimes,” as Sellers et al. (2017) have argued. Place equality regimes are rooted in long-term institutional and political developments, and vary across countries and even across metropolitan areas within countries. They are the combination of effects from welfare state institutions, central-local relations, as well as intergovernmental cooperation and revenue-sharing at the subnational levels. As mechanisms that organize fiscal solidarity among jurisdictions that provide services to citizens, they determine who gets what, when, and where, and thereby structure social inequalities more widely.

Supplemental Material

KblerRochat_UAR_online-supplement-layouted – Supplemental material for Fragmented Governance and Spatial Equity in Metropolitan Areas: The Role of Intergovernmental Cooperation and Revenue-Sharing

Supplemental material, KblerRochat_UAR_online-supplement-layouted for Fragmented Governance and Spatial Equity in Metropolitan Areas: The Role of Intergovernmental Cooperation and Revenue-Sharing by Daniel Kübler and Philippe E. Rochat in Urban Affairs Review

Footnotes

Acknowledgements

Earlier versions of this article were presented at the 2013 General Conference of the European Consortium of Political Research in Bordeaux, as well as at the 2014 Third Joint Conference on City Futures of the Urban Affairs Association and the European Urban Research Association in Paris. The authors thank the participants at these events, as well as Fabrizio Gilardi and Daniele Caramani for their insightful feedback on a previous draft. Finally, they also thank the three anonymous reviewers, as well as the editors of the Urban Affairs Review for their thorough reading and constructive comments.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: Research for this article was conducted in the framework of the National Center of Competence in Research titled “Challenges to Democracy in the 21st Century” at the University of Zurich and funded by the Swiss National Science Foundation.

Supplemental Material

Supplementary material is available online.

Notes

Author Biographies

Daniel Kübler is professor at the Department of Political Science and codirects the Centre for Democracy Studies at the University of Zurich. His research interests include urban politics and policy, multilevel governance and democracy, representative bureaucracy, as well as Swiss politics.

Philippe E. Rochat is a PhD student with the Centre for Democracy Studies at the University of Zurich. His research interests include metropolitan governance and politics, as well as local citizen participation.

References

Anderson

George

. 2010. Fiscal Federalism: A Comparative Introduction. Oxford: Oxford Univ. Press.

Andrew

Simon A.

2009. “Regional Integration Through Contracting Networks: An Empirical Analysis of Institutional Collective Action Framework.” Urban Affairs Review 44 (3): 378–402.

Bassand

Michel

. 2005. La métropolisation de la Suisse. [Metropolitanization of Switzerland]. Lausanne: Presses polytechniques et universitaires romandes.

Bochsler

Daniel

. 2010. “Horizontale Zusammenarbeit als Lösung des Problems der Kleinräumigkeit im Schweizer Föderalismus? Eine quantitative Perspektive.” [Horizontal cooperation as a solution to small scale? A quantitative perspective]. In Herausforderung HarmoS: Bildungspolitik, Föderalismus und Demokratie auf dem Prüfstand, edited by Auer

Andreas

, 124–46. Zürich: Schulthess.

Boyne

George

Powell

Martin

Ashworth

Rachel

. 2001. “Spatial Equity and Public Services.” Public Management Review 3 (1): 19–34.

Braun

Dietmar

. 2003. “Dezentraler und unitarischer Föderalismus. Die Schweiz und Deutschland im Vergleich.” [Decentral and unitary federalism. Switzerland and Germany compared]. Schweizerische Zeitschrift für Politikwissenschaft 9 (1): 57–89.

Buchanan

James

. 1971. “Principles of Urban Fiscal Strategy.” Public Choice 11:1–16.

Bundesamt für Statistik. 2014. Raum mit städtischem Charakter 2012 [Urban areas 2012]. Neuchâtel: Bundesamt für Statistik.

Carr

Jered B.

LeRoux

Kelly

Shrestha

Manoj

. 2009. “Institutional Ties, Transaction Costs, and External Service Production.” Urban Affairs Review 44 (3): 403–27.

10.

Chetty

Raj

Hendren

Nathaniel

Kline

Patrick

Saez

Emmanuel

. 2015. “Where Is the Land of Opportunity? The Geography of Intergenerational Mobility in the United States.” The Quarterly Journal of Economics 129 (4): 1553–1623.

11.

Craw

Michael

. 2010. “Deciding to Provide: Local Decisions on Providing Social Welfare.” American Journal of Political Science 54:906–20.

12.

Craw

Michael

. 2016. “Caught at the Bottom? Redistribution and Local Government in an Era of Devolution.” State and Local Government Review 47 (1): 68–77.

13.

Downs

Anthony

. 1994. New Visions for Metropolitan America. Washington, DC: Brookings Institution Press.

14.

Eidgenössische Finanzverwaltung. 2012. Finanzstatistik der Schweiz, Jahresbericht 2010 [Public finance in Switzerland, annual report 2010]. Neuenburg: Bundesamt für Statistik.

15.

Fainstein

Susan S.

2010. The Just City. Ithaca: Cornell Univ. Press.

16.

Feiock

Richard

. 2009. “Metropolitan Governance and Institutional Collective Action.” Urban Affairs Review 44 (3): 356–77.

17.

Fossati

Flavia

Häusermann

Silja

. 2014. “Social Policy Preferences and Party Choice in the 2011 Swiss Elections.” Swiss Political Science Review 20 (4): 590–611.

18.

Frey

René L.

1988. “Spillovers: Ursache von Agglomerationsproblemen und Lösungsmöglichkeiten.” [Spillovers: causes and solutions for metropolitan problems]. In Les enjeux de l’urbanisation/Agglomerationsprobleme in der Schweiz, edited by Bassand

Michel

Joye

Dominique

Schuler

Martin

, 142–55. Bern: Peter Lang.

19.

Frey

René L.

Frey

Miriam

. 2013. “Die NFA: Vorbild für Reformen der Kantone?” [The NFA: an example for cantonal reforms?]. In Irrgarten Finanzausgleich. Kantonsmonitoring Nr. 5: Wege zu mehr Effizienz bei der interkommunalen Solidarität, edited by Suisse

Avenir

, 13–26. Zürich: Avenir Suisse.

20.

Gilardi

Fabrizio

Kübler

Daniel

Wasserfallen

Fabio

. 2013. “Cantonal Tax Autonomy in Switzerland: History, Trends and Challenges.” In Autonomy in Subnational Income Taxes: Evolving Powers, Existing Practices in Seven Countries, edited by Almendral

Violeta Ruiz

Vaillancourt

François

, 121-140. Montréal: McGill-Queen’s University Press.

21.

Gillette

Clayton

. 2011. Local Redistribution and Local Democracy. New Haven: Yale Univ. Press.

22.

Hermann

Michael

Heye

Corinna

Leuthold

Heiri

. 2005. Soziokulturelle Unterschiede in der Schweiz. Vier Indizes zu räumlichen Disparitäten 1990-2000. [Socio-cultural differences in Switzerland: four indices of spatial disparities 1990-2000]. Neuchâtel: Bundesamt für Statistik.

23.

Hill

Richard Child

. 1974. “Separate and Unequal: Governmental Inequality in the Metropolis.” American Political Science Review 68:1557–68.

24.

Hoffmann-Martinot

Vincent

Sellers

Jeffrey

, eds. 2005. Metropolitanization and Political Change. Opladen: Verlag für Sozialwissenschaften.

25.

Höpflinger

François

. 1994. Am Rande des Sozialstaats. Formen und Funktion öffentlicher Sozialhilfe im Vergleich [At the margins of the Welfare State. Forms and functions of social welfare compared]. Bern: Haupt.

26.

Howell-Moroney

Michael

. 2008. “The Tiebout Hypothesis 50 Years Later: Lessons and Lingering Challenges for Metropolitan Governance in the 21st Century.” Public Administration Review 68 (1): 97–109.

27.

Huissoud

Thérèse

Stofer

Suzanne

Cunha

Antonio

Schuler

Martin

. 1999. Structures et tendances de la différenciation dans les espaces urbains en Suisse [Structures and tendencies of spatial differenciation in Swiss urban areas]. Lausanne: Swiss Federal Institute of Technology.

28.

Jimenez

Benedict S.

2014. “Separate, Unequal, and Ignored? Interjurisdictional Competition and the Budgetary Choices of Poor and Affluent Municipalities.” Public Administration Review 74 (2): 246–57.

29.

Klöti

Ulrich

. 2000. “Regieren im verflochtenen dreistufigen Föderalismus.” [Joint governance in three levels of federalism]. In Verwaltung, Regierung und Verfassung im Wandel. Gedächtnisschrift für Raimund E. Germann, edited by Knoepfel

Peter

Linder

Wolf

, 17–30. Basel: Helbing und Lichtenhahn.

30.

Koch

Philippe

Kübler

Daniel

. 2011. “Aufbruch zu neuen Grenzen? Debatten um den Schweizer Föderalismus.” [Towards new frontiers? Debates on Swiss federalism]. Zeitschrift für Staats und Europawissenschaften 9 (2): 262–80.

31.

Konferenz der kantonalen Finanzdirektorinnen und Finanzdirektoren. 2008. Handbuch Harmonisiertes Rechnungsmodell für die Kantone und Gemeinden [Handbook of standardized public sector accounting for cantons and municipalities]. Bern: Konferenz der kantonalen Finanzdirektorinnen und Finanzdirektoren.

32.

Kübler

Daniel

Schwab

Brigitte

. 2007. “New Regionalism in Five Swiss Metropolitan Areas: An Assessment of Inclusiveness, Deliberation and Democratic Accountability.” European Journal of Political Research 46 (4): 473–502.

33.

Linder

Wolf

. 2010. Swiss Democracy: Possible Solutions to Conflict in Multi-cultural Societies. 3rd ed. New York: St. Martin’s Press.

34.

Lowery

David

. 1999. “Sorting in the Fragmented Metropolis: Updating the Social Stratification-Government Inequality Debate.” Public Management Review 1 (1): 7–26.

35.

Lowery

David

. 2000. “A Transactions Costs Model of Metropolitan Governance: Allocation Versus Redistribution in Urban America.” Journal of Public Administration Research and Theory 10 (1): 49–78.

36.

Massey

Douglas S.

Denton

Nancy A.

1993. American Apartheid: Segregation and the Making of the Underclass. Cambridge: Harvard Univ. Press.

37.

Milanovic

Branko

. 2016. Global Inequality: A New Approach for the Age of Globalization. Cambridge: Harvard Univ. Press.

38.

Minkoff

Scott L.

2009. “Minding Your Neighborhood: The Spatial Context of Local Redistribution.” Social Science Quarterly 90 (3): 516–37.

39.

Neiman

Max

. 1976. “Social Stratification and Government Inequality.” American Political Science Review 70 (March): 149–54.

40.

Newton

Ken

. 2012. “Metropolitan Governance.” European Political Science 11 (3): 409–19.

41.

Oates

Wallace E.

1999. “An Essay on Fiscal Federalism.” Journal of Economic Literature 37 (3): 1120–49.

42.

Oates

Wallace E.

2005. “Towards a Second-Generation Theory of Fiscal Federalism.” International Tax and Public Finance 12:349–73.

43.

Oates

Wallace E.

2011. Fiscal Federalism. Aldershot: Edward Elgar.

44.

Orfield

Myron

. 2002. American Metropolitics: The New Suburban Reality. Washington, DC: Brookings Institution Press.

45.

Orfield

Myron

Luce

Thomas F.

2010. Region: Planning the Future in the Twin Cities. Minneapolis: Univ. of Minnesota Press.

46.

Ostrom

Elinor

. 1983. “The Social Stratification-Government Inequality Thesis Explored.” Urban Affairs Review 19 (1): 91–112.

47.

Peterson

Paul E.

1981. City Limits. Chicago: Chicago Univ. Press.

48.

Piketty

Thomas

. 2014. Capital in the twenty-first century. Cambridge (Mass.): Harvard University Press.

49.

Plüss

Larissa

. 2015. “Municipal Councillors in Metropolitan Governance: Assessing the Democratic Deficit of New Regionalism in Switzerland.” European Urban and Regional Studies 22 (3): 261–84. doi:10.1177/0969776412469804.

50.

Pressmann

Jeffrey

Wildavsky

Aaron

. 1973. Implementation. Berkeley: Univ. of California Press.

51.

Rühli

Lukas

Frey

Miriam

Frey

René L.

2013. Irrgarten Finanzausgleich. Wege zu mehr Effizienz bei der interkommunalen Solidarität [The financial compensation maze. Towards more efficiency in inter-municipal solidarity]. Zürich: Avenir Suisse.

52.

Rusk

David

. 2003. Cities Without Suburbs. 3rd ed. Washington, DC: Woodrow Wilson Center Press.

53.

Savitch

Hank

Vogel

Ronald K.

2009. “Regionalism and Urban Politics.” In Theories of Urban Politics, edited by Davies

Jonathan S.

Imbroscio

David L.

106–24. London: SAGE.

54.

Schaltegger

Christoph A.

Somogyi

Frank

Sturm

Jan-Egbert

. 2011. “Tax Competition and Income Sorting: Evidence from the Zurich Metropolitan Area.” European Journal of Political Economy 27:455–70.

55.

Schuler

Martin

Dessemontet

Pierre

Joye

Dominique

. 2005. Les niveaux géographiques de la Suisse. [Spatial scales of Switzerland]. Neuchâtel: Office fédéral de la statistique.

56.

Sellers

Jefferey M.

2017. Inequality and Governance in the Metropolis: Place Equality Regimes and Fiscal Choices in Eleven Countries. Houndmills: Palgrave Macmillan.

57.

Sellers

Jefferey M.

Lidström

Anders

. 2007. “Decentralization, Local Government, and the Welfare State.” Governance: An International Journal of Policy and Administration 20 (4): 609–32.

58.

Steenbergen

Marco R.

Jones

Bradford S.

2002. “Modeling Multilevel Data Structures.” American Journal of Political Science 46 (1): 218–37.

59.

Swanstrom

Todd

. 2001. “What We Argue About When We Argue About Regionalism.” Journal of Urban Affairs 23 (5): 479–96.

60.

Vogel

Ronald K.

Imbroscio

David L.

2013. “Governing Metropolitan Regions in the United States.” In Governance and Finance of Metropolitan Regions in Federal Systems, edited by Slack

Enid

Chattopadhyay

Rupak

290–323. Toronto: Oxford Univ. Press.

61.

Wallis

Allan D.

1994. “The Third Wave: Current Trends in Regional Governance.” National Civic Review 83 (Summer–Fall): 290–310.

62.

Walter

Felix

Amacher

Mathias

. 2013. Zentrums- und Sonderlasten in Agglomerationen. Grundlagenstudie im Rahmen des Monitorings urbaner Raum Schweiz [Centrality and other charges in metropolitan areas. Background study for the urban monitoring of Switzerland]. Bern: Bundesamt für Raumentwicklung.

63.

Wright

Bradley E.

McGinnis

Michael D.

Ostrom

Elinor

. 2011. “Reflections on Vincent Ostrom, Public Administration and Polycentricity.” Public Administration Review 72 (1): 15–25.

Supplementary Material

Please find the following supplemental material available below.

For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.

For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.

0.00 MB

0.38 MB

0.14 MB