The economic effects of direct democracy—a first global assessment

Abstract

This is the first study that assesses the economic effects of direct democratic institutions on a cross-country basis. We find that total spending as well as spending on welfare is lower in countries with mandatory referendums, consistent with the previous literature. But we also find that countries with national initiatives appear to spend more and be more corrupt. Finally, budget deficits, government effectiveness, productivity and “happiness” appear unrelated to direct democracy. Institutional detail thus matters a great deal. In general, the effects of direct-democratic institutions become stronger if the frequency of their actual use is taken into account. Effects are usually stronger in countries with weak democracies.