When is the Direct Democracy Paradigm a Reasonable Guide for Policy Choices in a Representative Democracy?

51 Pages Posted: 19 Aug 2000

See all articles by Yossi Spiegel

Yossi Spiegel

Tel Aviv University, Coller School of Management; Centre for Economic Policy Research (CEPR); ZEW – Leibniz Centre for European Economic Research

Alex Cukierman

Tel Aviv University - Eitan Berglas School of Economics; Interdisciplinary Center (IDC) Herzliyah; Centre for Economic Policy Research (CEPR)

Date Written: April 2000

Abstract

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

Spiegel, Yossi and Cukierman, Alex, When is the Direct Democracy Paradigm a Reasonable Guide for Policy Choices in a Representative Democracy? (April 2000). Available at SSRN: https://ssrn.com/abstract=236028 or http://dx.doi.org/10.2139/ssrn.236028

Yossi Spiegel (Contact Author)

Tel Aviv University, Coller School of Management ( email )

Ramat Aviv, Tel Aviv, 69978
Israel
972-3-640-9063 (Phone)
972-3-640-7739 (Fax)

HOME PAGE: http://www.tau.ac.il/~spiegel

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
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D-68034 Mannheim, 68034
Germany

Alex Cukierman

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
+972 3 540 5360 (Phone)
+972 3 640 9908 (Fax)

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

HOME PAGE: http://www.tau.ac.il/~alexcuk/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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