Budget Referendums and Government Spending: Evidence from Swiss

New government spending must be approved by a referendum of citizens in many Swiss cantons. This decisionmaking procedure seems like a simple way to address citizen-legislator agency problems, but little systematic evidence is available concerning its effect on spending outcomes. We estimate spending regressions for Swiss cantons using panel data from 1986 to 1997. After controlling for demographics and other determinants of spending, mandatory referendums on new spending are found to reduce the size of the budget by 17% for the median canton.Budget referendums, initiatives, government spending

Is Direct Democracy Good or Bad for Corporations and Unions?

The initiative and referendum were intended to curtail the power of organized interest groups, yet business groups account for more spending on ballot measures than any other group by far. Does this mean that direct democracy has become a tool for corporations to buy favorable legislation? This paper reports four types of evidence suggesting that the answer is no: analysis of the content of the universe of state-level initiatives in the United States from 1904 to 2021 shows that antibusiness initiatives were more common than probusiness initiatives, analysis of contribution patterns for California ballot measures from 2000 to 2020 shows that business groups more often opposed than supported initiatives, abnormal stock returns on election days show that corporate contributors earned positive abnormal returns when initiatives failed and negative abnormal returns when they passed, and for all three types of evidence business groups fared better with ballot measures proposed by legislatures. I find similar results for unions

Disobedience and Authority

This paper presents a theory of the allocation of authority in an organization in which centralization is limited by the agent's ability to disobey the principal. We show that workers are given more authority when they are costly to replace or do not mind looking for another job, even if they have no better information than the principal. The allocation of authority thus depends on external market conditions as well as the information and agency problems emphasized in the literature. Evidence from a national survey of organizations shows that worker autonomy is related to separation costs as the theory predicts.Delegation, Authority, Separation Costs, Optimal employment contracts

Demand for Environmental Goods: Evidence from Voting Patterns on California Initiatives

This paper studies voting behavior on 16 environmental ballot propositions in California in order to characterize the demand for environmental goods. The environment is found to be a normal good for people with mean incomes, but some environmental goods are inferior for people with high incomes, at least when supplied collectively. An important "price" of environmental goods is reduced income in the construction, farming, forestry, and manufacturing industries. In most cases, income and price can explain most of the variation in voting; it is not essential to introduce non-economic concepts such as ideology and politics

From families to formal contracts: An approach to development

a b s t r a c t a r t i c l e i n f o This paper develops a theory in which individuals can use one of two types of human/social capital to enforce contracts: "Local capital" relies on families and other personal networks; "market capital" relies on impersonal market institutions such as auditors and courts. Local capital is efficient when most trading is local, but only market capital can support trading between strangers that allows extensive division of labor and industrialization. We show that economies with a low cost of accumulating local capital (say, because people live close together) are richer than economies with a high cost of accumulation when long distance trade is difficult, but are slower to transition to impersonal market exchange (industrialize) when long distance trade becomes feasible. The model provides one way to understand why the wealthiest economies in 1600 AD, China, India, and the Islamic Middle East, industrialized more slowly than the West. We report an array of historical evidence documenting the pre-industrial importance of family and kinship networks in China, India, and the Islamic world compared to Europe, and the modernization problems linked to local capital

Voting Technology, Vote-by-Mail, and Residual Votes in California, 1990-2010

This paper examines how the growth in vote-by-mail and changes in voting technologies led to changes in the residual vote rate in California from 1990 to 2010. We find that in California’s presidential elections, counties that abandoned punch cards in favor of optical scanning enjoyed a significant improvement in the residual vote rate. However, these findings do not always translate to other races. For instance, find that the InkaVote system in Los Angeles has been a mixed success, performing very well in presidential and gubernatorial races, fairly well for ballot propositions, and poorly in Senate races. We also conduct the first analysis of the effects of the rise of vote-by-mail on residual votes. Regardless of the race, increased use of the mails to cast ballots is robustly associated with a rise in the residual vote rate. The effect is so strong that the rise of voting by mail in California has mostly wiped out all the reductions in residual votes that were due to improved voting technologies since the early 1990s