When is the Direct Democracy Paradigm a Reasonable Guide for Policy Choices in a Representative Democracy?
51 Pages Posted: 19 Aug 2000
Date Written: April 2000
The direct democracy (DD) paradigm that uses the median voter theorem to predict policy outcomes has been widely used to study the interactions between economic and political behavior. While this approach is easy to work with, it abstract from institutional detail. This paper explores the extent to which the DD paradigm is useful for understanding policy choices in two parties representative democracy (RD) systems by distinguishing cases in which it leads on average to the same policy choices as RD, from cases in which it does not. In the second case, the paper identifies determinants of the magnitude and sign of the average divergence (or bias) between policy choices in DD and in RD. This is done within a framework with electoral uncertainty in which elected officials in a RD possess better information than individual voters on external circumstances, but are also subject to the influence of particular constituencies. For the case in which there is a bias, the paper fully characterizes its size and magnitude in terms of the degree of polarization between the parties, their electoral prospects, and the distribution of electoral uncertainty. Those general results are illustrated by means of an application to the influential Meltzer and Richard (1981), direct democracy, theory of the size of government.
Keywords: Direct Democracy, Representative Democracy, Median Voter, Policy Bias, Political Uncertainty
JEL Classification: D72, D78
Suggested Citation: Suggested Citation
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By Margit Kraus
By Margit Kraus