Abstract
Summary Most German states changed their local constitutions during the 1990s in order to become more citizen-friendly. To reach that goal, many local constitutions now allow for the direct election of mayors, initiatives and referenda, and vote-aggregation as well as vote-splitting. Simultaneously, the five-percent threshold was abolished lowering entry barriers. This contribution asks whether these reforms had any effects on local fiscal policies. Based on the reforms that took place in Schleswig-Holstein, Bavaria and Hesse and drawing on a structural break test it is shown that the direct election of mayors has led to lower government spending. The introduction of direct democratic elements, on the other hand, has led to higher expenditures. The empirical results concerning direct democracy substantially deviate from the findings regarding both Switzerland and the U.S.. It is argued that the difference might be due to the lack of fiscal referenda in Germany.
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