The Impact of Direct Democracy on Society - Universität St.Gallen

– 213 –qualification, teacher shortages, total hours <strong>of</strong> schooling, student-teacher ratio, availabilityand quality <strong>of</strong> instruction material, and state <strong>of</strong> school building or availability <strong>of</strong> space. <strong>The</strong>reduced form includes the combined direct and indirect influence <strong>of</strong> political institutions,whereas the structural form includes only the direct influence because the indirect influence isfiltered out. Whereas both forms are estimated in the U.S. literature, the reduced form is usedmore frequently. Nevertheless, the impact <strong>of</strong> tax limits is found to significantly lowerperformance for both forms.In the structural form, the relation between student performance and all its predictors outlinedabove can be expressed by the following function:performance = f(democracy, culture, individual, peers, school, canton, school inputs),where democracy denotes direct democratic institutions, and culture the main regional culture<strong>of</strong> the school location, which accounts for differences in people's mentality. Individualdenotes the student's individual and family characteristics such as gender and parents'education. Peers stands for peer group characteristics that aim at measuring the externaleffects <strong>of</strong> the peer group on an individual's academic performance: i.e. individual academicperformance might depend on the intellectual potential <strong>of</strong> peers 240 . School denotesschool/class-related characteristics like the selectivity <strong>of</strong> the institution or problems with classdiscipline. Canton represents cantonal sociodemographics, which serve two purposes: first,they can be viewed as proxies for missing individual and peer group variables in class (e.g.religion); second, they account for the sociodemographic determinants <strong>of</strong> the demand forpublic goods 241 . Finally, school inputs denote revenue-driven school inputs as describedabove. A description <strong>of</strong> variables can be found in table 11.1 <strong>of</strong> the Appendix.For predicting the impact <strong>of</strong> the sociodemographic and peer controls, the reader is referred tothe literature cited in the fields <strong>of</strong> educational economics and public finance (e.g. WINSTONand ZIMMERMAN 2003, FIGLIO 1997). As regards the structural model, the influence <strong>of</strong>revenue-driven inputs on student performance is amply described in the educational240 In small classes, there might even exist a feedback relation and continuing interaction between the one andthe other(s) (for empirical literature on peer effects, see ZIMMER and TOMA (2000), SUMMERS and WOLFE(1977), KERCKHOFF (1986), EPPLE et al. (2003), HOXBY (2000a), RANGVID (2004)).241 See e.g. FELD, et al. (2004) for a justification.