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Direct democracy and government size: evidence from Spain

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  • Carlos Sanz

    (Banco de España)

Abstract

Direct democracy is spreading across the world, but little is known about its effects on policy. I provide evidence from a unique scenario. In Spain, national law determines that municipalities follow either direct or representative democracy, depending on their population. Regression discontinuity estimates indicate that direct democracy leads to smaller government, reducing public spending by around 8%. Public revenue decreases by a similar amount and, therefore, there is no effect on budget defi cits. These fi ndings can be explained by a model in which direct democracy allows voters to enforce lower specialinterest spending.

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  • Carlos Sanz, 2017. "Direct democracy and government size: evidence from Spain," Working Papers 1709, Banco de España.
    • Handle: RePEc:bde:wpaper:1709
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    References listed on IDEAS

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    1. Direct democracy and small government
      by Nicholas Gruen in Club Troppo on 2017-03-30 16:22:12

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    Cited by:

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    2. Funk, Patricia & Litschig, Stephan, 2020. "Policy choices in assembly versus representative democracy: Evidence from Swiss communes," Journal of Public Economics, Elsevier, vol. 182(C).
    3. Geschwind, Stephan & Roesel, Felix, 2022. "Taxation under direct democracy," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 536-554.
    4. Kantorowicz, Jarosław, 2017. "Electoral systems and fiscal policy outcomes: Evidence from Poland," European Journal of Political Economy, Elsevier, vol. 47(C), pages 36-60.
    5. Martín Gonzalez-Eiras & Carlos Sanz, 2018. "Women’s representation in politics: voter bias, party bias, and electoral systems," Working Papers 1834, Banco de España.
    6. Saima Nawaz & Idrees Khawaja, 2020. "The Impact of Political Regime and Institutions on Government Size in Middle-Income Countries," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 59(2), pages 199-220.
    7. Guadalupe Correa-Lopera, 2018. "Why Delegate? Comparing Direct and Representative Democracy," Working Papers 2018-01, Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center.

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    More about this item

    Keywords

    public finance; political economy; direct democracy; government spending; deficits; budget; regression discontinuity;
    All these keywords.

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H - Public Economics

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