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Direct democracy and government size: evidence from Spain

Published online by Cambridge University Press:  27 March 2019

Carlos Sanz
Carlos Sanz*
Affiliation:
Banco de España, Research, C/ Alcalá 48, Madrid, 28014Spain
*
*Corresponding author. Email: carlossanz@bde.es
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Abstract

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.

Keywords

Comparative political economycomparative politics: industrialized countriescomparative politics: political institutionspolitical economypublic economics
Type
Original Article
Information
Political Science Research and Methods , Volume 8 , Issue 4 , October 2020 , pp. 630 - 645
Copyright
Copyright © The European Political Science Association 2019

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Sanz Dataset

Dataset

https://doi.org/10.7910/DVN/XDFN2E
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