Direct Democracy, Political Delegation, and Responsibility Substitution *

Abstract This paper studies how adding direct democracy institutions to representative democracy affects politicians' incentives and selection, and citizens' welfare. While direct democracy allows citizens to correct politicians' mistakes, it also reduces the incentives of elected representatives to search for good policies. This responsibility substitution reduces citizens' ability to screen competent politicians when elections are the only means to address political agency problems. A lower cost of direct democracy induces a negative spiral on politicians incentives, which we represent by a disincentive multiplier. As a consequence, introducing initiatives or lowering their cost can make voters worse off