Public Choice

, Volume 160, Issue 3–4, pp 367–389 | Cite as

Do constitutions matter? Evidence from a natural experiment at the municipality level



This paper asks if it does matter for taxes and government spending whether the mayor is elected (and recalled) by direct election or by the municipal council. It thus contributes to the economic literature on the impact of constitutions on economic outcomes. The effects are identified based on reforms of the municipal constitutions that were exogenous from the point of view of the municipalities in content and timing: each year, quasi-randomly selected groups of municipalities introduced the new constitution. This setup helps overcome endogeneity and identification issues that are common to many studies in the field using country level data. Using a new panel dataset of the 686 municipalities in three German states, this paper shows that direct mayoral election and recall through referendum only (as opposed to election and recall through the municipal council) reduce tax rates and increases spending on government employees.


Constitutional economics Division of powers Municipalities Presidential government Parliamentary government Government spending Tax rate Mayor Natural experiment 

JEL Classification

D72 H11 H71 H72 K10 R51 



I would like to thank Charles B. Blankart, Viktor Steiner, Ronny Freier, Alasdair Rutherford, two anonymous referees, and the seminar participants at DIW Berlin, Humboldt University Berlin, EEA Congress 2011 in Oslo, EPCS Meeting 2011 in Rennes, and SMYE 2010 in Luxembourg for helpful comments and suggestions. The DIW Berlin Public Economics Department helped with obtaining most of the data for which I am particularly grateful. Furthermore, I am indebted to Helke Seitz who provided excellent research assistance by organizing the data.


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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Humboldt University of BerlinBerlinGermany
  2. 2.German Institute for Economic Research (DIW)BerlinGermany

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