The Effect of Local Initiatives on Government Spending∗

In this paper I use theory and data to show that the initiative process in cities in-creases local government spending. I theorize that this is due to the presence of in-terest groups who seek pork-barrel spending while operating in a low-information environment. The effect of statewide initiatives is shown in the context of a for-mal theory to have a surprising interactive effect with local initiatives. Statewide initiatives have a tendency to shift spending to local governments, but when those cities have access to a local initiative, the effect of the state-level institution is dampened because interest groups face greater budgetary constraints and there-fore will be able to demand less additional spending. The statewide initiative, therefore, has a limited effect on aggregate spending when the local initiative is present, though it may influence the composition of spending. These theoretical relationships are explored empirically using data for approximately 750 cities i