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| Author: | Funk, P. Gathmann, C. |
| Title: | Does direct democracy reduce the size of government? New evidence from historical data, 1890-2000 |
| Journal: | Economic Journal
2011 : DEC, VOL 121:557 p. 1252-1280 |
| Index terms: | public sector local government democracy decentralisation government public expenditure Switzerland |
| Language: | eng |
| Abstract: | Utilizing new historical data from Swiss cantons, we evaluate the effect of direct democracy on government spending. Fixed effects are used to control for unobserved heterogeneity and new instruments to address potential endogeneity issues. It is found that direct democracy constrains canton spending but its effect is less significant than previously suggested. The instrumental variable estimates indicate that a mandatory budget referendum reduces canton expenditures by 12%. By lowering the signature requirements for the voter initiative by 1% the canton spending can be reduced by 0.6%. We find little evidence that direct democracy at the canton level causes higher local spending or decentralisation. |
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