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Representative versus Direct Democracy: The Role of Informational Asymmetries

  • Anke Kessler

The paper studies the relative merits of direct and representative legislation in a setting where voters are uncertain both with respect to the likely consequences of different policies and with respect to the political preferences of their fellow citizens. Under representative legislation, the latter translates into uncertainty on the elected official's future policy intentions which involves a loss of control. The resulting discretionary power, however, also leads officials to endogenously acquire competence on the issues they oversee and specialize in policy formation. Policies determined in representative democracies are therefore better tailored to relevant contingencies but less close to the preferences of a majority than those determined in popular ballots. It is shown that the extent of the resulting trade-off depends on the set of alternatives among which the policy is to be chosen. Two extensions, referenda and the possibility of re-election, are briefly considered.

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File URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse18_2000.pdf
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Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse18_2000.

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Length: 35
Date of creation: Nov 2000
Date of revision:
Handle: RePEc:bon:bonedp:bgse18_2000
Contact details of provider: Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de

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  1. Cukierman, A. & Tommasi, M., 1997. "When Does It Take a Nixon to Go to China," Papers 30-97, Tel Aviv.
  2. Frey, Bruno S, 1994. "Direct Democracy: Politico-economic Lessons from Swiss Experience," American Economic Review, American Economic Association, vol. 84(2), pages 338-42, May.
  3. Steunenberg, Bernard, 1992. "Referendum, Initiative, and Veto Power: Budgetary Decision Making in Local Government," Kyklos, Wiley Blackwell, vol. 45(4), pages 501-29.
  4. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Scholarly Articles 4554125, Harvard University Department of Economics.
  5. Feld, Lars P & Savioz, Marcel R, 1997. "Direct Democracy Matters for Economic Performance: An Empirical Investigation," Kyklos, Wiley Blackwell, vol. 50(4), pages 507-38.
  6. Castanheira, Micael, 2002. "On the (Non) Paradox of (Not) Voting," CEPR Discussion Papers 3126, C.E.P.R. Discussion Papers.
  7. Matsusaka, John G & McCarty, Nolan M, 2001. "Political Resource Allocation: Benefits and Costs of Voter Initiatives," Journal of Law, Economics and Organization, Oxford University Press, vol. 17(2), pages 413-48, October.
  8. Friedrich Schneider, 1999. "Die Entwicklung der Sozialpolitik in repräsentativen und in direkten Demokratien: Königsweg oder Sackgasse? Einige Bemerkungen aus der "Public Choice"-Perspektive," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 135(III), pages 387-406, September.
  9. Anthony M. Marino & John G. Matsusaka, 2005. "Decision Processes, Agency Problems, and Information: An Economic Analysis of Capital Budgeting Procedures," Review of Financial Studies, Society for Financial Studies, vol. 18(1), pages 301-325.
  10. Feld, Lars P. & Matsusaka, John G., 2003. "Budget referendums and government spending: evidence from Swiss cantons," Journal of Public Economics, Elsevier, vol. 87(12), pages 2703-2724, December.
  11. Martin J. Osborne & Al Slivinksi, 1995. "A Model of Political Competition with Citizen-Candidates," Department of Economics Working Papers 1995-01, McMaster University.
  12. Matsusaka, John G, 1992. "Economics of Direct Legislation," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 541-71, May.
  13. Harrington, Joseph E, Jr, 1993. "Economic Policy, Economic Performance, and Elections," American Economic Review, American Economic Association, vol. 83(1), pages 27-42, March.
  14. Besley, Timothy & Coate, Stephen, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 85-114, February.
  15. Lars P. Feld & John G. Matsusaka, 2000. "Budget Referendums and Government Spending: Evidence from Swiss," CESifo Working Paper Series 323, CESifo Group Munich.
  16. Osband, Kent, 1989. "Optimal Forecasting Incentives," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1091-1112, October.
  17. Besley, Timothy & Coate, Stephen, 1998. "Sources of Inefficiency in a Representative Democracy: A Dynamic Analysis," American Economic Review, American Economic Association, vol. 88(1), pages 139-56, March.
  18. Feld, Lars P. & Kirchgassner, Gebhard, 2000. "Direct democracy, political culture, and the outcome of economic policy: a report on the Swiss experience," European Journal of Political Economy, Elsevier, vol. 16(2), pages 287-306, June.
  19. Rexford Santerre, 1989. "Representative versus direct democracy: Are there any expenditure differences?," Public Choice, Springer, vol. 60(2), pages 145-154, February.
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