Two-sided uncertainty in the monopoly agenda setter model

We extend the Romer-Rosenthal model of representative democracy to a signaling environment, in which (i) only the representatives knows the ‘status quo’ outcome resulting if her take-it-or-leave-it policy proposal is rejected by the voters, while (ii) only the voters know their true preferences over policies. A separating sequential equilibrium is shown to exist, and to uniquely satisfy a common equilibrium refinement. Furthermore, this equilibrium has the property that, relative to the environment where the status quo is known to the voter, there is a downward bias in the setter's proposal, and an associated upward bias in the probability of the proposal's acceptance by the voter.     

A direct test of direct democracy: New England town meetings

Representative democracies govern most locales in the US, making it difficult to compare performance relative to direct democracy. New England states, however, provide an opportunity to test both direct and representative democracy at the local level. This article uses revealed preference axioms to compare spending patterns in New England towns and cities against median voter hypothesis benchmarks. Contrary to previous evidence, we find no differences between direct and representative democracy. The results suggest that horizontal competition arising from local fragmentation minimize differences between direct and representative local government, providing support for wider applicability of median voter-based empirical models of local government behaviour in the US.     

Political Resource Allocation: Benefits and Costs of Voter Initiatives

This article explores the benefits and costs of the voter initiative,a direct democracy device that allows policy decisions to bemade by voters rather than their elected representatives. Previousresearch suggests that by introducing "competition" into theproposal process, the initiative leads to policies that arecloser to the median voter's ideal point. In our model, in contrast,the effect of the initiative is conditional on the severityof representative agency problems and uncertainty about voterpreferences. The initiative always makes the voter better offwhen representatives are faithful agents, but when voter preferencesare uncertain, initiatives can cause "shirking" representativesto choose policies farther from the voter's ideal point. Ourevidence shows that initiatives are more common in states withheterogeneous populations, and initiatives reduce state spendingwhen Democrats control the government and when citizens havediverse preferences.     

Fairness in tax compliance: A political competition model

This paper analyzes the political economy of income redistribution when voters are concerned about fairness in tax compliance. We consider a two‐stage model where there is a two‐party competition over the tax rate and over the intensity of the tax enforcement policy in the first stage, and voters decide about their level of tax compliance in the second stage. We find that if the concern about fairness in tax compliance is high enough, a liberal middle‐income majority of voters may block any income redistribution policy. Alternatively, we find an equilibrium in which the preferences of the median voter are ignored in favor of a coalition formed by a group of relatively poor voters and the richest voters. In this equilibrium income redistribution prevails with no tax enforcement.     

Policy biases with voters’ uncertainty about the economy and the government

We model policy choices where parties competing for election are better informed than voters about the state of the economy. In addition voters are uncertain about the incumbent's preferences and the median voter's vote potentially depends on the state of the economy. The incumbent may bias his policy in order to convey information to the voters and raise his chance of reelection. The bias depends crucially on which kind of uncertainty is the most important. Uncertainty about preferences leads to moderate policies, while uncertainty about the state of the economy leads to extreme policies.     

LOBBYING AND ELECTIONS

I analyse the interaction between post‐election lobbying and the voting decisions of forward‐looking voters. The existing literature has shown that in models with citizen candidates from a dispersed distribution of preferences, lobbying has no influence on implemented policy. In my model with ideological parties, lobbying is shown to have an effect on policy. In terms of welfare, I show that the median voter and the majority of voters can be better off with lobbying.     

Manipulation through political endorsements

We study elections with three candidates under plurality voting. A candidate is a Condorcet loser if the majority of the voters place that candidate at the bottom of their preference rankings. We first show that a Condorcet loser might win the election in a three-way race. Next we introduce to the model an endorser who has private information about the true probability distribution of the preferences of the voters. Observable endorsements facilitate coordination among voters who may otherwise split their votes and lead to the victory of the Condorcet loser. When the endorser has an ideological bias towards one of the candidates, the coordination impact of endorsements remains unaltered, moreover the endorser successfully manipulates the outcome of the election in favor of his bias, even if his ideological bias is known by the voters. The results are true for any endorsement cost and any magnitude of bias as long as the electorate is large enough.     

INTEREST GROUPS,ELECTORAL COMPETITION,AND PROBABILISTIC VOTING FOR TRADE POLICIES*

Current models of trade policy formation in representative democracies lack the micro foundations from which the political actions of voters, interest groups, and policy makers can be deduced. This paper provides microfoundations for the most influential of representative democracy models, the Magee-Brock-Young (MBY) model. Probabilistic voting is formally introduced, the conditions for active lobbying are examined, uniqueness of lobbying equilibrium is established, and the responses of different groups' lobbying to exogenous changes are discussed. Finally, the existence of tariff equilibria is studied when, different from MBY, both parties share a common strategy space.     

Politicians and Preferences of the Voter Majority: Does Gender Matter?

Does the gender of political representatives affect the extent to which they adhere to the voter majority's preferences? By matching individual male and female representatives' votes on legislative proposals with real referendum outcomes on the same issues, we obtain a direct measure of divergence. We find that female and male representatives adhere equally close to the majority's preferences if party affiliations are taken into account. This suggests that observed gender differences with respect to the national majority of voters may be reduced to an ideological left–right dimension.     

Constitutional choice in ancient Athens: the evolution of the frequency of decision making

Contrary to modern representative democracies where elections tend to take place years apart, in the direct democracy of ancient Athens the assembly of the citizens met to decide policy up to forty times per year. The paper explores a model of constitutional choice where self-interested citizens decide how long to wait until they vote by maximising the net gain from an uncertain voting outcome. It is found that the frequency of voting increases unambiguously when the probability of being a member of the winning majority increases, and decreases with the loss from being a member of the losing minority and the resource cost of the vote. Under some plausible conditions, the frequency also rises with increases in the utility gain from the vote, the discount rate, and the required majority to pass a policy motion. It is argued that those conditions were met in Athens.     

A choice experiment on fuel taxation and earmarking in Norway

Pigouvian taxes are efficient — but unpopular among voters — and hence often politically infeasible. Earmarking of revenues has been widely reported to increase public support for taxes, but earmarking is generally not the most efficient use of the revenues. This trade-off between efficiency and political feasibility is the motivation for our primary research objective: to quantify the effect of earmarking on support for fuel tax rises. Our secondary research objective is to investigate why earmarking increases support. Using data from a representative sample of the Norwegian voter population (N = 1147), we estimate models of voter preferences for fuel taxes using logistic regression models. Our results show that, in the absence of earmarking, the majority of voters would like to reduce fuel taxes, but earmarking the revenues for environmental measures has a substantial effect on voter support for fuel tax increases, garnering a majority for increases of up to 15% above present levels. Further analysis indicates that a prime reason why earmarking for environmental measures is popular is that it increases the perceived environmental effectiveness of the tax, and hence its legitimacy as an environmental rather than a fiscal policy instrument.     

The initiative,referendum, and distribution of income: An empirical analysis of Swiss cantons

This study examines how direct democratic institutions affect income distribution before and after taxes. Based on a panel of Swiss cantons from 1945 to 2014, we test the effects of the constitutional reforms of direct democratic instruments. Our findings show that better voter access to the initiative induces policy shifts that significantly decrease top incomes and benefit the upper middle class. For the popular referendum we do not find such effects. The income effects of direct democracy are not a consequence of shifts in fiscal redistribution, but rather result from policy changes affecting pre-tax incomes.     

Inefficient policies and incumbency advantage

We present a model of (re)elections in which an incumbency advantage arises because the incumbent can manipulate issue salience by choosing inefficient policies in the policy dimension in which he is the stronger candidate. The voters are uncertain about the state of the world and the incumbent's choice of policy. Under complete information they would reelect the incumbent if and only if the state is sufficiently high. Undesirable policy outcomes may be due to either a bad state or the incumbent's choice of inefficient policies. The incumbent uses inefficient policies in intermediate states, whereby he creates uncertainty about the true state in such a way that voters are better off in expectation reelecting him. Hence the equilibrium exhibits an incumbency advantage that stems from asymmetric information and the use of inefficient policies.     

Voter preferences,direct democracy and government spending

This article uses unique voting data on 331 federal propositions to estimate voter preferences in Swiss cantons. We document that preferences vary systematically with cantonal 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 cantonal 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%. 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.     

Redistributive policies with heterogeneous social preferences of voters

There is growing evidence on the roles of fairness and other-regarding preferences as fundamental human motives. Call voters with fair preferences, as in Fehr and Schmidt (1999), fair-voters. By contrast, traditional political economy models are based on selfish-voters who derive utility solely from “own” payoff. In a general equilibrium model with endogenous labor supply, a mixture of fair and selfish voters choose optimal policy through majority voting. First, we show that majority voting produces a unique winner in pairwise contests over feasible policies (the Condorcet winner). Second, we show that a preference for greater fairness leads to greater redistribution. An increase in the number of fair voters can also lead to greater redistribution. Third, we show that in economies where the majority are selfish-voters, the decisive policy could be chosen by fair-voters, and vice versa. Fourth, while choosing labor supply, even fair voters behave exactly like selfish voters. We show how this apparently inconsistent behavior in different domains (voting and labor supply) can be rationalized within the model.     

Would rational voters acquire costly information?

We analyze an election in which voters are uncertain about which of two alternatives is better for them. Voters can acquire some costly information about the alternatives. In agreement with Downs's rational ignorance hypothesis, individual investment in political information declines to zero as the number of voters increases. However, if the marginal cost of information is near zero for nearly irrelevant information, there is a sequence of equilibria such that the election outcome is likely to correspond to the interests of the majority for arbitrarily large numbers of voters. Thus, “rationally ignorant” voters are consistent with a well-informed electorate.     

Is money where the fun ends? Material interests and individuals’ preference for direct democracy

Are people’s attitudes towards referendums as a decision-making procedure predominantly driven by their material self-interest, or do individuals also value direct democracy as such, regardless of the material payoffs associated with anticipated policy outcomes? To answer this question, we use a survey data set that offers information on respondents’ support for referendums as a procedure to decide on tax policy, their income levels, socio-economic characteristics, and, most importantly, their expectation about the majority’s support for higher taxes. We find that the support of low-income individuals for referendums increases substantially if they expect a clear population majority in favor of more redistribution. Conversely, individuals with a high income who expect a majority in favor of higher taxes do not reject referendums more strongly than individuals with an average income who share these expectations.     

A Psychologically Based Model of Voter Turnout

We analyze a psychologically based model of voter turnout. Potential voters experience regret if they fail to vote, which is the motivation for participation in voting. Regret from abstention is inversely related to the margin of victory. Voters on the winner's side experience less regret than those on the loser's side. We show that the unique equilibrium involves positive voter turnout. We show that the losing side has higher turnout. In addition, voter turnout is positively related to importance of the election and the competitiveness of the election. We also consider scenarios in which voters are uncertain about the composition of the electorate's political preferences and show similar phenomena emerge.     

Are Democracies Cleaner?

We inquire whether democracies enjoy lower pollution levels than autocracies by investigating the ‘clean democracy hypothesis’, which posits that democracies have a more demand-determined policy formation leading to more stringent environmental policies. We test this hypothesis with a large data set covering 137 countries and the period 1970–2012 using eleven different air pollutants as endogenous variables and a wide range of control variables measuring democracy, development stage, globalization, and factor endowments. We find no consistent evidence that democracies are cleaner, not even the richer ones, which casts doubt on the validity of single pollutants studies. Numerous checks show the robustness of our results.     

The political economy of direct legislation: direct democracy and local decision–making

Local and regional governments account for an important share of total government spending and, given the decentralization trend in OECD nations, this is likely to increase. How should this spending be governed? This article argues that direct democracy is best suited to organize decision–making at the state and local level. To support this, we present the main theoretical arguments on why and how referenda and initiatives affect fiscal policy outcomes. The basic argument concerns voter control. Under representative democracy, citizens only have direct control at election time. With referenda and initiatives, citizens can selectively control their representatives on specific policies whenever they deviate sufficiently from citizens' preferences. As a result, fiscal policy outcomes are likely to more closely reflect voter preferences. We empirically test this on Swiss data since Switzerland provides a 'natural laboratory' for local governance. The governance structures of Swiss cantons and localities with respect to fiscal issues range from classic parliamentary democracy to pure direct democracy, and an important part of spending and taxation is controlled at these levels. Specifically, we estimate an econometric model of fiscal behaviour using data from 1986 to 1997 for the 26 Swiss cantons, and 1990 data on 134 local communities. It is shown that mandatory referenda on fiscal issues at both levels have a dampening effect on expenditure and revenue, and at the local level also on public debt. Combining this with existing empirical evidence leads to a relatively uncontested result, namely that elements of direct democracy are associated with sounder public finances, better economic performance and higher satisfaction of citizens.