DIRECT DEMOCRACY AND GOVERNMENT SIZE:
EVIDENCE FROM SPAIN
Carlos Sanzy
Princeton University
November 27, 2015
Job-Market Paper
Abstract
Interest in direct democracy is spreading across the world, but little is known
about its e ects on policy. In this paper, 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 a smaller government,reducing public spending and revenues by 4%. These ndings can be explained by a model in which direct democracy, by unbundling issues, allows voters to enforce lower special-interest spending. As a result, policy is better aligned with the preferences of the median voter. I also nd that, consistent with the model, the reduction in public spending is entirely driven by lower current expenditures, which are more easily targetable, while capital (infrastructure) expenditures are not a ected.
Direct democracy
https://en.wikipedia.org/wiki/Direct_democracy
