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Working
Paper Series:
09.05
Direct Democracy and Redistribution
Christopher R. Berry
http://www.harrisschool.uchicago.edu/faculty/web-pages/christopher-berry.asp
Abstract:
One of the most robust empirical findings about direct democracy is that US
states with the voter initiative tax and spend significantly less than states without the
initiative, at least since the mid-1970s. The fiscal differential between initiative states and
non-initiative states has been interpreted as an indication that voters prefer smaller
government than legislators. Yet, existing research has not explained exactly which elements
of the public budget are cut as a result of the initiative. This paper does so. I find that the
major fiscal effect of the initiative is not smaller government in general, but specifically the
effect is lesser and more unequal education funding. In particular, the overall spending
differential in initiative states is due primarily to reductions in state aid to school districts for
elementary and secondary education. Local governments do not compensate for the lost
state aid through increases in revenue from other sources. Therefore, because state funding
of education is a progressive force that works toward equalizing school spending, initiative
states also experience significantly higher levels of inequality across districts in per pupil
spending. I discuss implications of these results for the understanding of direct democracy
and its effects on the relationship between voters and politicians.
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