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Decision-making Institutions and Voters’ Preferences for Fiscal Policies

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Abstract

This paper examines the effect of local political decision-making institutions (i.e., direct democracy vs. representative democracy) on citizens’ preferences toward public spending. Exogenous variation in institutions comes from a regression discontinuity design, which exploits a discrete change in the probability that a municipality has representative democracy based on a legally stipulated population threshold in the Swiss canton (state) of Vaud. Fiscal policy preferences by municipality are measured by vote shares on Swiss national referendums and initiatives that, if approved, would have increased public spending. Relative to direct democracy, representative democracy reduces vote shares in favor of spending by around 5 percentage points. The effect is not due to sorting on other observables or to feedback from changes in local policies. These findings demonstrate the importance of preferences as a channel through which political decision-making institutions can affect public policies.

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  • Sergio Galletta, 2018. "Decision-making Institutions and Voters’ Preferences for Fiscal Policies," KOF Working papers 18-448, KOF Swiss Economic Institute, ETH Zurich.
    • Handle: RePEc:kof:wpskof:18-448
    DOI: 10.3929/ethz-b-000313882
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    More about this item

    Keywords

    voter preferences; decision-making institutions; Switzerland; direct democracy;
    All these keywords.

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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