The effect of direct democracy on the level and structure of local taxes

Asatryan, Zareh ; Baskaran, Thushyanthan ; Heinemann, Friedrich

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URN: urn:nbn:de:bsz:180-madoc-354598
Document Type: Working paper
Year of publication: 2014
The title of a journal, publication series: ZEW Discussion Papers
Volume: 14-003
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: D72 , D78 , H71,
Keywords (English): 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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