On the efficiency of equilibria in a legislative bargaining model with particularistic and collective goods

Voter initiatives are important for policy making in many countries. While much research shows that the initiative process affects policy choices, almost no evidence explains how the initiative process affects policy. Initiatives might change policy directly through voters approving laws that override the legislature; or the initiative process may change policy indirectly by providing a threat that induces the legislature to change policy. This article develops an empirical strategy to measure the direct and indirect effects of the initiative based on the idea that direct effects can be inferred from states that actually pass initiatives while indirect effects can be inferred from states where the initiative is available but not used. Evidence from 50 states on nine separate issues suggests that both direct and indirect effects are important, but the direct effect is several times larger than the threat effect.