Direct democracy and local government efficiency |
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| Institution: | 1. ZEW Mannheim, University of Freiburg, Germany;2. Top Institute for Evidence Based Education Research, Maastricht University, Kapoenstraat 2, 6200 MD Maastricht, The Netherlands;3. Leuven Economics of Education Research, Faculty of Economics and Business, KU Leuven, Naamsestraat 69, 3000 Leuven, Belgium;1. Department of Economics and Law, Sapienza University of Rome, Via del Castro Laurenziano 9, 00161, Rome, Italy;2. Italian Institute of Statistics (ISTAT), Via A. Depretis 72, 00184, Rome, Italy;1. ADRI-CG, Deakin University, Burwood, Victoria 3125, Australia;2. Department of Economics, Monash University, Caulfield East, Victoria 3145, Australia;1. School of Economics, Singapore Management University, 90 Stamford Road, 178903, Singapore;2. Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, 14 Nanyang Drive, 637332, Singapore |
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| Abstract: | This paper studies the role of direct democracy in ensuring efficient and cost-effective provision of goods and services in the public sector. The sample consists of the population of municipalities in the German State of Bavaria, where in the mid-1990s considerable direct democratic reforms granted citizens wide opportunities to directly participate in local affairs through binding initiatives. Using information on the municipal resources and the municipal provision of public goods, and applying a fully non-parametric approach to estimate local government overall efficiency, the analysis shows that more direct democratic activity is associated with higher government efficiency. This result suggests that more inclusive governance through direct decision-making mechanisms may induce more accountable and less inefficient governments. |
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