Government accountability through electoral engagement, involvement and participation in the political debate can affect government performance. Using data for the full sample of Swiss cantons over the 1981–2001 period, this paper provides empirical evidence that government accountability is crucial for fiscal discipline. Specifically, in cantons with high levels of government accountability, the level of indebtedness is significantly lower, indicating that accountability supports fiscal discipline. To obtain a useful approximation for government accountability between citizens and their representatives, we use information from direct voter participation in political decisions (initiatives and public referenda) in Swiss state (cantonal) governments. Electoral support of government proposals reveals an important aspect of accountability in a real world setting.

The intention of this paper is to analyse how audit courts and local autonomy affect political discussion, controlling in a multivariate analysis for a broad variety of potential factors focusing on Switzerland, due to its variety of audit court competences and its strong decentralised structure. With data from the World Values Survey 1995-1997 (Swiss data 1996) evidence has been found that a higher audit court competence and a lower level of centralization is correlated with a higher level of political discussion. Thus, the results in Switzerland suggest that such institutions help improve citizens’ willingness to acquire information costs and discuss political matters.

Policymakers often propose strict enforcement strategies to fight the shadow economy and to increase tax morale. However, there is also a bottom-up approach: decentralizing the political power to those who are close to the problems and give them a direct political say. This paper analyses the impact of direct democracy and local autonomy on tax morale and the size of the shadow economy. We use two different data sets on tax morale at the individual level (World Values Survey and International Social Survey Programme), and macro data of the size of the shadow economy to systematically analyse the effects of institutions in Switzerland, a country where participation rights and the degree of federalism vary across different cantons. The findings suggest that direct democratic rights and local autonomy, have a significantly positive effect on tax morale and the size of the shadow economy.