Voters in democracies can learn from the experience of neighbouring states: about policy in a direct democracy (`policy experimentation'), about the quality of their politicians in a representative democracy (`yardstick competition'). Learning between states creates spillovers from policy choice, and also from constitutional choice. I model these spillovers in a simple principal-agent framework, and show that voter welfare may be maximized by a mixture of representative and direct democratic states. Because of this, empirical work examining voter welfare under direct democracy may need to be reinterpreted. Also, I show that the optimal mix of constitutions cannot always be achieved in a constitutional choice equilibrium involving many states.
Aghion, P., A.F. Alesina and F. Trebbi (2002) `Endogenous Political Institutions'. NBER Working Paper9006.
3.
Arceneaux, K. (2002) `Direct Democracy and the Link between Public Opinion and State Abortion Policy', State Politics and Policy Quarterly2(4): 372-87.
4.
Bailey, M.A., M.C. Rom and M.M. Taylor (2004) `State Competition in Higher Education: A Race to the Top, or a Race to the Bottom?', Economics of Governance5(1): 53-75.
5.
Barbera, S. and M.O. Jackson (2004) `Choosing How to Choose: Self-stable Majority Rules and Constitutions', Quarterly Journal of Economics119(3): 1011-48.
6.
Barro, R.J. (1973) `The Control of Politicians: An Economic Model' , Public Choice14(1): 19-42.
7.
Berry, F.S. and W.D. Berry (1999) `Innovation and Diffusion Models in Policy Research' , in P. Sabatier (ed.) Theories of the Policy Process, pp. 169-200. Boulder, CO: Westview Press.
8.
Besley, T. and S. Coate (2003) `Centralized versus Decentralized Provision of Local Public Goods: A Political Economy Approach', Journal of Public Economics87(12): 2611-37.
9.
Boehmke, F.J. (1999) `Casino Gaming Diffusion, the Initiative Process and Expected Voter Support', paper prepared for presentation at the 71st Annual Meeting of the Southern Political Science Association, November 3-6.
10.
Boix, C. (2003) Democracy and Redistribution. Cambridge: Cambridge University Press.
11.
Bowler, S. and T. Donovan (2004) `Measuring the Effects of Direct Democracy on State Policy: Not All Initiatives Are Created Equal', State Politics and Policy Quarterly4(3): 345-63.
12.
Burden, B.C. (2005) `Institutional Features and Policy Representation in the States', State Politics and Policy Quarterly5: 373-93.
13.
California Healthcare Foundation (2005) `Background: Similarities and Differences between Competing Propositions 78 and 79'. Available at: <http://www.healthvote.org/index.php/site/article/C33/79_background >
14.
Camobreco, J.F. (1998) `Preferences, Fiscal Policies, and the Initiative Process', Journal of Politics60(3): 819-29.
15.
Cronin, T.E. (1989) Direct Democracy: The Politics of Initiative, Referendum, and Recall. Cambridge, MA: Harvard University Press.
16.
Feld, L.P. and G. Kirchgassner (2000) `Direct Democracy, Political Culture and the Outcome of Economic Policy: A Report on the Swiss Experience' , European Journal of Political Economy16(2): 287-306.
17.
Feld, L.P. and M. Savioz (1997) `Direct Democracy Matters for Economic Performance: An Empirical Investigation', Kyklos50: 507-38.
18.
Ferejohn, J. (1986) `Incumbent Performance and Electoral Control', Public Choice50(1): 5-25.
19.
Frey, B.S. and A. Stutzer (2000) `Happiness, Economy and Institutions', Economic Journal110(466): 918-38.
20.
Gerber, E.R. (1996) `Legislative Response to the Threat of Popular Initiatives', American Journal of Political Science40(1): 99-128.
21.
Gerber, E.R. (1999) The Populist Paradox: Interest Group Influence and the Promise of Direct Legislation. Princeton, NJ: Princeton University Press.
22.
Haider-Markel, D.P. (2001) `Policy Diffusion as a Geographical Expansion of the Scope of Political Conflict: Same-sex Marriage Bans in the 1990s', State Politics and Policy Quarterly1(1): 5-26.
23.
Hawkins, R.B. (1979) `State Tax and Spending Limitation Activities in 1978', Publius9(1): 27-29.
24.
Huntington, S.P. (1991) The Third Wave. Norman, OK: University of Oklahoma Press.
25.
Kirlin, J.J. (1982) `The Impacts of Proposition 13 upon the California Political System: Re-regulating the Intergovernmental System', Public Choice39(1): 147-69.
26.
Lascher, E.L.L., Jr, M.G. Hagen and S.A. Rochlin (1996) `Gun Behind the Door? Ballot Initiatives, State Policies and Public Opinion', Journal of Politics58(3): 760-75.
27.
Maskin, E. and J. Tirole (2004) `The Politician and the Judge: Accountability in Government', American Economic Review94(4): 1034-54.
28.
Matsusaka, J.G. (2001) `Problems with a Methodology Used to Evaluate the Voter Initiative', Journal of Politics63(4): 1250-6.
29.
Matsusaka, J.G. (2004) For the Many or the Few: The Initiative, Public Policy, and American Democracy. Chicago: University of Chicago Press.
30.
Oates, W.E. (1999) `An Essay on Fiscal Federalism', Journal of Economic Literature37(3): 1120-49.
31.
Rincke, J. (2007) `Policy Diffusion in Space and Time: The Case of Charter Schools in California School Districts', Regional Science and Urban Economics37(5): 526-41.
32.
Rose-Ackerman, S. (1980) `Risk-taking and Reelection: Does Federalism Promote Innovation?', Journal of Legal Studies9: 593-616.
33.
Salmon, P. (1987) `Decentralization as an Incentive Scheme', Oxford Review of Economic Policy3(2): 24.
34.
Schaltegger, C.A. and D. Küttel (2002) `Exit, Voice, and Mimicking Behavior: Evidence from Swiss Cantons',Public Choice113(1): 1-23.
35.
Smith, D.A. (1998) Tax Crusaders and the Politics of Direct Democracy . London: Routledge.
36.
Strumpf, K.S. (2002) `Does Government Decentralization Increase Policy Innovation?', Journal of Public Economic Theory4: 207-41.
37.
Walker, J.L. (1969) `The Diffusion of Innovations among theAmerican States', American Political Science Review63(3): 880-99.
38.
Wrede, M. (2001) `Yardstick Competition to Tame the Leviathan', European Journal of Political Economy17(4): 705-21.
