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Taxation under Direct Democracy

Stephan Geschwind and Felix Roesel ()

No 9166, CESifo Working Paper Series from CESifo

Abstract: Do citizens legislate different tax policies than parliaments? We provide quasi-experimental evidence for causal effects of direct democracy. Town meetings (popular assemblies) replace local councils in small German municipalities below a specific population threshold. Difference-in-differences, RD and event study estimates consistently show that direct democracy comes with sizable but selective tax cuts. Property tax rates, which apply to all residents, decrease by some 10 to 15% under direct democracy. We do not find that business tax rates change. Direct democracy allows citizens to design tax policies more individually than voting for a high-tax or low-tax party in elections.

Keywords: direct democracy; town meeting; popular assembly; constitution; public finance; taxation (search for similar items in EconPapers)
JEL-codes: D71 D72 H71 R51 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cdm, nep-eur, nep-pbe, nep-pol, nep-pub and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9166

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