Pandora's ballot box: Electoral politics of direct democracy

We study how office-seeking parties use direct democracy to shape elections. A party with a strong electoral base can benefit from using a binding referendum to resolve issues that divide its core supporters. When referendums do not bind, however, an electorally disadvantaged party may initiate a referendum to elevate new issues. It does so with the goal of dividing its stronger opponent's supporters. We identify conditions under which direct democracy improves congruence between policy outcomes and voter preferences, but also show that it can lead to greater misalignment both on issues subject to direct democracy and those that are not.