Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/236708 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9166
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
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.
Subjects: 
direct democracy
town meeting
popular assembly
constitution
public finance
taxation
JEL: 
D71
D72
H71
R51
Document Type: 
Working Paper
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