How can states benefit from the equity premium puzzle? Debt as revenue source for Swiss cantons

Christen, Ramon; Soguel, Nils C.

doi:10.1186/s41937-019-0030-x

Swiss Journal of Economics and Statistics

Table 1 Regression results

From: How can states benefit from the equity premium puzzle? Debt as revenue source for Swiss cantons

	(1) Fixed effects	(2) Baseline	(3) Assets and equity	(4) Year dummies	(5) Two step	(6) Endogenous	(7) Lags	(8) No GE and BS	(9) Interest rate	(10) No conditions	(11) No capacity	(12) No stability
Lagged dependent variable	0.761***	0.877***	0.769***	0.592***	0.791***	0.646***	0.826***	0.854***	0.750***	0.894***	0.816***	0.828***
Lagged dependent variable	(0.057)	(0.119)	(0.128)	(0.093)	(0.179)	(0.116)	(0.107)	(0.129)	(0.074)	(0.125)	(0.130)	(0.132)
Debt (1000 CHF per capita)	0.004	0.048**	0.055**	0.039**	0.126**	0.034*	0.037**	0.087**	6.867**	0.051**	0.033*	0.030*
Debt (1000 CHF per capita)	(0.007)	(0.019)	(0.023)	(0.018)	(0.053)	(0.020)	(0.017)	(0.039)	(2.992)	(0.019)	(0.017)	(0.015)
Cantonal overall fiscal balance (1000 CHF per capita)	0.043	0.060	0.021	0.031	0.158	0.093	0.058	0.087**	− 0.775	0.066	0.059
Cantonal overall fiscal balance (1000 CHF per capita)	(0.035)	(0.039)	(0.044)	(0.040)	(0.101)	(0.057)	(0.038)	(0.036)	(3.499)	(0.039)	(0.038)
Equity (in 1000 CHF per capita)			0.036**
Equity (in 1000 CHF per capita)			(0.014)
Cantonal non-administrative assets (in 1000 CHF per capita)			− 0.027
Cantonal non-administrative assets (in 1000 CHF per capita)			(0.018)
Interest receivable (1000 CHF per capita)	− 0.110	− 0.187**	− 0.190**	− 0.123*	− 0.462	− 0.211	− 0.179**	− 0.214**	− 20.094	− 0.193**	− 0.150**
Interest receivable (1000 CHF per capita)	(0.089)	(0.077)	(0.071)	(0.066)	(0.624)	(0.132)	(0.071)	(0.079)	(13.034)	(0.078)	(0.066)
Tax revenue (1000 CHF per capita)	− 0.025	− 0.112**	− 0.068	− 0.091*	− 0.264**	− 0.095*	− 0.083*	− 0.118**	− 15.553**	− 0.120**	− 0.060*
Tax revenue (1000 CHF per capita)	(0.037)	(0.045)	(0.040)	(0.047)	(0.125)	(0.052)	(0.042)	(0.043)	(7.527)	(0.046)	(0.035)
Municipal fiscal balance (1000 CHF per capita)	− 0.040	0.002	0.024	0.301**	− 0.645	0.052	0.000	− 0.013	21.012	− 0.012	− 0.008
Municipal fiscal balance (1000 CHF per capita)	(0.075)	(0.083)	(0.083)	(0.109)	(0.729)	(0.103)	(0.081)	(0.081)	(12.352)	(0.079)	(0.070)
No bailout (dummy = 1 after 2003)	− 0.105**	0.041	0.014	0.848	0.976*	− 0.073	− 0.005	0.040	9.018	0.044	0.007
No bailout (dummy = 1 after 2003)	(0.041)	(0.071)	(0.067)	(0.763)	(0.560)	(0.104)	(0.063)	(0.074)	(10.832)	(0.083)	(0.070)
Municipal fiscal balance X no bailout	0.169	0.048	− 0.012	−0.197	0.399	− 0.043	0.061	0.012	− 24.251	0.097	0.036
Municipal fiscal balance X no bailout	(0.147)	(0.123)	(0.126)	(0.146)	(0.628)	(0.154)	(0.125)	(0.114)	(19.478)	(0.124)	(0.123)
Cantonal nominal GDP (1000 CHF per capita)	0.004	0.004*	0.002	0.001	0.004*	0.004	0.003	0.004	− 0.003	0.003		− 0.005*
Cantonal nominal GDP (1000 CHF per capita)	(0.004)	(0.002)	(0.002)	(0.002)	(0.002)	(0.002)	(0.002)	(0.003)	(0.289)	(0.002)		(0.002)
Log (population)	− 0.335	− 0.006	0.039*	0.046*	0.151*	0.026	0.003	−0.017	1.740	0.001		0.006
Log (population)	(0.412)	(0.018)	(0.022)	(0.026)	(0.088)	(0.035)	(0.016)	(0.023)	(3.449)	(0.018)		(0.028)
Population growth (in %)	0.008	− 0.011	− 0.005	0.019	− 0.005	0.012	− 0.010	− 0.004	2.000	− 0.014		− 0.004
Population growth (in %)	(0.021)	(0.021)	(0.024)	(0.022)	(0.039)	(0.034)	(0.021)	(0.026)	(4.701)	(0.020)		(0.020)
Elderly (as % of total population)	− 0.007	− 0.003	0.009	0.022*	0.030	0.005	−0.002	−0.009	1.270	−0.002		−0.014
Elderly (as % of total population)	(0.015)	(0.006)	(0.011)	(0.013)	(0.036)	(0.013)	(0.006)	(0.013)	(0.854)	(0.006)		(0.014)
Young (as % of total population)	− 0.001	− 0.005	0.025	0.003	0.061	− 0.005	− 0.003	− 0.006	− 2.239	− 0.005		− 0.003
Young (as % of total population)	(0.017)	(0.007)	(0.015)	(0.015)	(0.040)	(0.013)	(0.007)	(0.010)	(1.402)	(0.008)		(0.008)
Unemployment (in %)	0.001	− 0.026*	− 0.029**	− 0.006	− 0.061*	− 0.018	− 0.019	− 0.033*	− 3.419	− 0.023*		− 0.025**
Unemployment (in %)	(0.010)	(0.013)	(0.012)	(0.027)	(0.030)	(0.021)	(0.012)	(0.017)	(2.740)	(0.012)		(0.012)
Bourgeois parties in executive (as % of all members)	0.001	0.001	0.001	− 0.001	0.001	0.000	0.001	0.001	− 0.158	0.001		0.001
Bourgeois parties in executive (as % of all members)	(0.002)	(0.001)	(0.001)	(0.001)	(0.002)	(0.002)	(0.001)	(0.001)	(0.168)	(0.001)		(0.001)
Referendum stringency (index)	− 0.010	− 0.015	0.006	0.002	0.019	− 0.062	− 0.009	− 0.004	− 0.991		0.003	0.004
Referendum stringency (index)	(0.022)	(0.013)	(0.014)	(0.017)	(0.039)	(0.069)	(0.012)	(0.015)	(2.124)		(0.008)	(0.011)
Accounting standard (index)	− 0.081	− 0.101*	− 0.256***	0.007	− 0.347**	− 0.076	− 0.099*	− 0.117*	2.263		− 0.085*	− 0.100*
Accounting standard (index)	(0.054)	(0.050)	(0.091)	(0.043)	(0.164)	(0.075)	(0.051)	(0.068)	(3.600)		(0.047)	(0.055)
Debt brake (index)	0.019	0.014	0.000	− 0.003	− 0.086	− 0.064	0.004	0.025	2.700		0.002	0.021
Debt brake (index)	(0.036)	(0.015)	(0.023)	(0.024)	(0.055)	(0.072)	(0.015)	(0.021)	(2.863)		(0.011)	(0.026)
Election year (dummy)	0.035	0.041	0.049	0.034*	0.062	0.513***	0.041	0.044	3.256		0.042	0.036
Election year (dummy)	(0.027)	(0.028)	(0.036)	(0.019)	(0.039)	(0.175)	(0.027)	(0.030)	(3.120)		(0.027)	(0.027)
Risk-free rate (in basis points)									0.226***
Risk-free rate (in basis points)									(0.046)
N	841	841	618	841	841	841	841	773	884	841	841	841
Number of groups	26	26	26	26	26	26	26	24	26	26	26	26
Number of instruments		41	45	105	41	47	47	41	41	33	29	29
F statistic entire model	88.22	68.62***	71.82**	53.68***	28.79***	73.39***	81.45***	100.60***	823.49***	62.25***	41.56***	46.70***
Hansen statistic (chi2)		8.54	9.27	0.00	8.54	7.80	10.44	8.04	8.97	12.17	15.08	16.18
AR(1)		− 2.74***	− 2.37**	− 3.41***	− 2.73***	− 3.04***	− 2.75***	− 2.62***	− 2.77**	− 2.68***	− 2.48**	− 2.75***
AR(2)		1.11	0.98	0.80	1.08	− 0.52	1.06	0.79	1.01	1.20	1.09	1.12

Notes: System GMM estimation (one-step) with standard errors corrected for finite samples and clustered at cantonal level in parentheses. Significance levels: ***1%; **5%, and *10%. The dependent variable is the subsequent (t + 1) cantonal log of the spread between the interest rate on the debt and the risk-free rate. Endogenous regressors: “lagged dependent variable” and debt per capita (except in model 4); instruments: tax revenue forecasting misestimations, GMM-style instruments of endogenous regressors (lags 2 to 3, collapsed)

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