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How to Tame Two Leviathans? Revisiting the Effect of Direct Democracy on Local Public Expenditure

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  • Sergio Galletta

    ()
    (Istituto di economia politica (IdEP), Facoltà di scienze economiche, Università della Svizzera italiana, Svizzera)

  • Mario Jametti

    ()
    (Istituto di economia politica (IdEP), Facoltà di scienze economiche, Università della Svizzera italiana, Svizzera)

Abstract

We explore how the vertical structure of direct democracy in a federal context affects expenditure decisions of sub-central governments. In so doing we revisit previous research on the effect of direct democratic institution on public policies. Particularly, the effect of upper-level (state) existence of direct democratic control on local expenditure. Empirically we exploit the fact that both states (cantons) and local governments (municipalities) enjoy a high autonomy in setting their degree of direct democracy. This allows us to take into account vertical differences between institutions, i.e. we can distinguish the effect of state direct democracy on local expenditures for municipalities with and without own direct democratic instruments. Considering 119 municipalities belonging to 22 Swiss cantons for the period 1993-2007 we highlight that municipalities without fiscal referenda belonging to cantons with fiscal referenda present higher expenditure, while the effect is much reduced and statistically significantly different for municipalities that also avail of referenda.

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Bibliographic Info

Paper provided by USI Università della Svizzera italiana in its series Quaderni della facoltà di Scienze economiche dell'Università di Lugano with number 1207.

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Length: 29 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:lug:wpaper:1207

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Web page: https://www.bul.sbu.usi.ch

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Keywords: Direct Democracy; Local Public Expenditure; Vertical Interaction;

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Cited by:
  1. Mario Jametti & Marcelin Joanis, 2014. "Elections and de facto Expenditure Decentralization in Canada," IdEP Economic Papers 1404, USI Università della Svizzera italiana.
  2. Agnese Sacchi & Aline Pennisi, 2013. "Is direct democracy a problem or a promise for fiscal outcomes? The case of the United States," Departmental Working Papers of Economics - University 'Roma Tre' 0178, Department of Economics - University Roma Tre.
  3. Mario Jametti & Marcelin Joanis, 2014. "Elections and de facto Expenditure Decentralization in Canada," CIRANO Working Papers 2014s-28, CIRANO.
  4. Patricia Funk & Christina Gathmann, 2014. "Direct Democracy as a Disciplinary Device on Excessive Public Spending," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 12(1), pages 18-23, 04.
  5. Asatryan, Zareh & Baskaran, Thushyanthan & Grigoriadis, Theocharis & Heinemann, Friedrich, 2013. "Direct democracy and local public finances under cooperative federalism," ZEW Discussion Papers 13-038, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. Mario Jametti, 2014. "Weathering the Global Financial Crisis - Is Direct Democracy of any Help?," IdEP Economic Papers 1405, USI Università della Svizzera italiana.
  7. Mario Jametti, 2014. "Tax Competition and Direct Democracy in Local Public Finance - Empirical Work on Switzerland," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 12(1), pages 12-17, 04.

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