Direct democracy , taxation , regression discontinuity , Bavaria
Abstract:
We study the effect of direct democracy on local taxation. Our setting is the
German federal state of Bavaria, where in 1995 a state-wide referendum introduced
the possibility to initiate direct democratic legislation into the local government
code. Relying on a sample of all Bavarian municipalities over the period 1980-2011,
we hypothesize that complementing a representative form of government with direct
democratic elements leads to (i) higher local tax rates and (ii) a shift of the local tax
mix from taxes with broader (property taxes) to taxes with narrower bases (business
taxes). For identifcation, we implement selection on observables and difference-indiscontinuity
designs. Our results show that both actual direct democratic activity
- measured by the number of initiatives - and the ease with which direct democratic
legislation can be implemented - measured by signature and quorum requirements
- increase local tax rates and shift the tax mix toward taxes with narrower bases.
Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.
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