Something for Something: How and Why Direct Democracy Impacts Service Quality

Abstract

Does direct democracy affect the quality of government services? Numerous studies find that direct democracy reduces government revenues, but whether this reflects lower quality services, or simply reduced waste, is unknown. I use a local government reform to estimate the effect of mandatory tax referendums on both revenues and service quality, here measured using fire department response times. The introduction of referendums reduces revenue growth by 1.8%, while also increasing response times by half a minute. An analysis of precinct-level service utilization and electoral behavior suggests that this effect is driven not by voter myopia, but by selfinterest. Poor precincts, which are six times as likely to experience a structure fire, are also six times as likely to vote to increase taxes. Consistent with the precinct-level results, the effects of referendums are smallest in the poorest districts, and are largest in the wealthiest districts.