Direct democracy and government size: evidence from Spain

Carlos Sanz

Political Science Research and Methods, 2020, vol. 8, issue 4, 630-645

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.

Date: 2020
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Working Paper: Direct democracy and government size: evidence from Spain (2017)
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