I study the effects of direct democracy on economic policy in a novel setting. In Spain, national law determines that municipalities follow either direct or representative democracy, depending on their population size. Using a fixed-effect regression discontinuity design, I find that direct democracy leads to a smaller government, reducing public spending by around 8 percent. Revenues decrease by a similar amount and, therefore, there is no effect on budget deficits. These findings can be explained by a model in which direct democracy allows voters to enforce lower special-interest spending. I provide several additional results and discuss alternative mechanisms.
CITATION STYLE
Sanz, C. (2020). Direct democracy and government size: Evidence from Spain. Political Science Research and Methods, 8(4), 630–645. https://doi.org/10.1017/psrm.2018.65
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