The Economic Effects of Direct Democracy - a Cross-Country Assessment

29 Pages Posted: 16 Jun 2006

See all articles by Stefan Voigt

Stefan Voigt

University of Hamburg - Institute of Law & Economics; CESifo (Center for Economic Studies and Ifo Institute)

Lorenz Blume

Phillips University Marburg

Date Written: June 2006

Abstract

This is the first study that assesses the economic effects of direct democratic institutions on a cross country basis. Most of the results of the former intra-country studies could be confirmed. On the basis of some 30 countries, a higher degree of direct democracy leads to lower total government expenditure (albeit insignificantly) but also to higher central government revenue. Central government budget deficits are lower in countries using direct democratic institutions. As former intra-country studies, we also find that government effectiveness is higher under strong direct-democratic institutions and corruption lower. Both labor and total factor productivity are significantly higher in countries with direct democratic institutions. The low number of observations as well as the very general nature of the variable used to proxy for direct democracy clearly call for a more fine-grained analysis of the issues.

Keywords: Direct Democracy, Economic Effects of Constitutions, Government Revenue, Government Spending

JEL Classification: H1, H3, H5, H8

Suggested Citation

Voigt, Stefan and Blume, Lorenz, The Economic Effects of Direct Democracy - a Cross-Country Assessment (June 2006). Available at SSRN: https://ssrn.com/abstract=908942 or http://dx.doi.org/10.2139/ssrn.908942

Stefan Voigt (Contact Author)

University of Hamburg - Institute of Law & Economics ( email )

Johnsallee 35
Hamburg, 20148
Germany
+49-40-428385782 (Phone)
+49-40-428386794 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Lorenz Blume

Phillips University Marburg ( email )

Am Plan 2
Marburg, D-35037
Germany

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