Public Choice by Referenda or Delegation. An Experimental Comparison of Direct and Indirect Democracy

Direct democracy with its use of referenda avoids the prototypical principal-agent problems of delegation in indirect democracies, especially since elected representatives are usually not committed by law to keep their promises. Sequential or more complex referenda may, however, result in an inferior combination of realized policy measures. Thus, it is an open question which type of institution (direct or indirect democracy) will be more efficient. Our experimental study explores this issue and finds that direct democracy seems to perform better.