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The Rise of Referendums

Author

Listed:
  • Correa-Lopera, Guadalupe
  • Mattozzi, Andrea
  • Nicolò, Antonio

Abstract

An incumbent politician with private information regarding the optimal policy may delegate the choice to the voter by calling a popular referendum. If the voter does not trust politicians because of potential capture, delegation inefficiency may arise in equilibrium: all non-captured politicians, independently of their competence, may "give back power to the people" even if such delegation entails a lower probability of choosing the optimal policy. As such, direct democracy can act as a subtle form of pandering by elected representatives. Consistently with anecdotal evidence, the model predicts that distrust in politicians increases the use of referendums and popular initiatives in representative democracies. We discuss the welfare consequences of the recent rise in the use of referendums.

Suggested Citation

  • Correa-Lopera, Guadalupe & Mattozzi, Andrea & Nicolò, Antonio, 2023. "The Rise of Referendums," CEPR Discussion Papers 18652, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18652
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    More about this item

    Keywords

    Democracy; Distrust; Referendum;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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