HOW DID LOCAL GOVERNMENTS RECOVER THEIR FINANCIAL CONDITION? LESSONS FROM CITIZEN PARTICIPATION

This study offers lessons for overcoming future economic crises by examining whether democrat-ic management helped local governments recover their financial condition. During the Great Recession, local governments were forced to make painful de-cisions regarding increased taxes and user charges, and cuts in public services. Several case studies pro-vide evidence that citizen participation allows local-ities to increase property taxes as well as cut public services. However, broader, systematic empirical re-search is lacking. This study found that local govern-ments with participatory budgeting were more likely to improve their financial condition during the Great Recession. The results allow us to identify the role of citizens in fiscal decision-making, offering lessons on how local governments can overcome possible fiscal crises in the future.