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Should We Tax or Cap Political Contributions? A Lobbying Model with Policy Favors and Access

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Author Info
Christopher Cotton () (Department of Economics, University of Miami)

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Abstract

This paper develops a model of political contributions in which a politician can either sell policy favors, or sell access. Access allows interest groups to share hard information with the politician in support of their preferred policy. Here selling access maximizes policy utility, while selling policy favors maximizes total contributions. Imposing a binding contribution limit makes it more likely that the politician sells access, which can improve expected constituent welfare. However, a contribution limit distorts the signals associated with the contributions, which tends to result in worse policy. Alternatively, a tax on political contributions can ensure that the politician sells access without distorting his information. Therefore, from the viewpoint of a representative constituent, a tax on contributions is strictly preferred to a contribution limit or no reform. The politician, however, may prefer regulation in the form of a contribution limit, even when a tax is better for the constituent.

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File URL: http://www.bus.miami.edu/_assets/files/faculty-and-research/academic-departments/eco/eco-working-papers/wp2009-01-TaxOrCap.pdf
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File Function: First Version, 2008
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Publisher Info
Paper provided by University of Miami, Department of Economics in its series Working Papers with number 0901.

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Length: 34 pages
Date of creation: Dec 2008
Date of revision:
Handle: RePEc:mia:wpaper:0901

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Related research
Keywords: Lobbying; campaign ï¬nance reform; political access; bid caps; verfiable information; evidence disclosure;

Other versions of this item:

Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Austen-Smith, David, 1998. "Allocating Access for Information and Contributions," Journal of Law, Economics and Organization, Oxford University Press, vol. 14(2), pages 277-303, October.
  2. Christopher Cotton, 2008. "Access Fees in Politics," Working Papers 0903, University of Miami, Department of Economics. [Downloadable!]
  3. Lipman Barton L. & Seppi Duane J., 1995. "Robust Inference in Communication Games with Partial Provability," Journal of Economic Theory, Elsevier, vol. 66(2), pages 370-405, August. [Downloadable!] (restricted)
  4. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September. [Downloadable!] (restricted)
    Other versions:
  5. Che, Yeon-Koo & Gale, Ian L, 1998. "Caps on Political Lobbying," American Economic Review, American Economic Association, vol. 88(3), pages 643-51, June. [Downloadable!] (restricted)
    Other versions:
  6. Paul Milgrom & John Roberts, 1986. "Relying on the Information of Interested Parties," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 18-32, Spring. [Downloadable!] (restricted)
    Other versions:
  7. Simon P. Anderson & Jacob K. Goeree & Charles A. Holt, 1998. "Rent Seeking with Bounded Rationality: An Analysis of the All-Pay Auction," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 828-853, August. [Downloadable!] (restricted)
  8. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February. [Downloadable!] (restricted)
  9. Riezman, Raymond & Wilson, John Douglas, 1997. "Political reform and trade policy," Journal of International Economics, Elsevier, vol. 42(1-2), pages 67-90, February. [Downloadable!] (restricted)
    Other versions:
  10. Holt, Charles A, Jr & Sherman, Roger, 1982. "Waiting-Line Auctions," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 280-94, April. [Downloadable!] (restricted)
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