Direct Democracy, Voter Preferences and Government Spending

Abstract

This article uses unique voting data on 331 federal propositions to estimate voter preferences in Swiss cantons. We document that preferences vary systematically with canton characteristics. In particular, cantons whose voters are more conservative, less in favor of redistribution and less supportive of public spending tend to have stronger direct democracy. We show that voter preferences have a stable and sizable effect on government spending even conditional on many observable canton characteristics. We then revisit the relationship between direct democracy and public spending. Once we fully control for voter preferences, the cross-sectional correlation between direct democracy and government spending declines by roughly 20 percent. The results in this article provide empirical support for models, in which both voter preferences and direct democratic institutions are important determinants of the size of government.

Keywords: Voter Preferences, Institutions, Direct Democracy, Fiscal Policy, Switzerland

JEL Classification: H11, H50, H62, H70