An Economic Theory of Referendum Voting: School Construction and Stock Adjustment

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Abstract
Local public project referenda provide the voter a unique opportunity to shape public activity. Prior studies of these votes fail to develop a behavioral model of this choice, usually relying on ad hoc explanations of variables that, for one reason or another, contribute to forecasts of referendum results. Our paper outlines a stock adjustment model of school bond referenda and tests this model using data from a set of school elections in West Virginia. The unique features of our model are treatment of the bond voting decision as an input decision and, hence, as involving derived demand; analysis of the bond referendum as a stock adjustment decision; and concentration on voting as a decision between discrete, mutually exclusive options.