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Power-hungry Candidates, Policy Favors, and Pareto Improving Campaign Finance Policy

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Stephen Coate

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Abstract

This paper argues that campaign finance policy, in the form of contribution limits and matching public financing, can be Pareto improving even under the most optimistic assumptions concerning the role of campaign advertising and the rationality of voters. The argument assumes that candidates use campaign contributions to convey truthful information to voters about their qualifications for office and that voters update their beliefs rationally on the basis of the information they have seen. It also assumes that campaign contributions are provided by interest groups and that candidates can offer to provide policy favors for their interest groups to attract higher contributions. The argument is developed in the context of a simple model of political competition with campaign contributions and informative advertising.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9601.

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Date of creation: Apr 2003
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Handle: RePEc:nbr:nberwo:9601

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D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior

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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. David M Kreps & Robert Wilson, 2003. "Sequential Equilibrium," Levine's Working Paper Archive 618897000000000813, David K. Levine. [Downloadable!]
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  2. Prat, Andrea, 2002. "Campaign Advertising and Voter Welfare," Review of Economic Studies, Blackwell Publishing, vol. 69(4), pages 999-1017, October.
  3. 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:
  4. Timothy Besley & Stephen Coate, 2000. "Issue Unbundling via Citizens' Initiatives," NBER Working Papers 8036, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Thomas Stratmann, 2006. "Contribution limits and the effectiveness of campaign spending," Public Choice, Springer, vol. 129(3), pages 461-474, December. [Downloadable!] (restricted)
  6. Grossman, Gene M & Helpman, Elhanan, 1996. "Electoral Competition and Special Interest Politics," Review of Economic Studies, Blackwell Publishing, vol. 63(2), pages 265-86, April. [Downloadable!] (restricted)
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  7. Potters, Jan & Sloof, Randolph & van Winden, Frans, 1997. "Campaign expenditures, contributions and direct endorsements: The strategic use of information and money to influence voter behavior," European Journal of Political Economy, Elsevier, vol. 13(1), pages 1-31, February. [Downloadable!] (restricted)
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  8. Levitt, Steven D, 1994. "Using Repeat Challengers to Estimate the Effect of Campaign Spending on Election Outcomes in the U.S. House," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 777-98, August. [Downloadable!] (restricted)
  9. Enriqueta Aragonés & Thomas R. Palfrey, 2000. "Mixed Equilibrium in a Downsian Model with a Favored Candidate," Economics Working Papers 502, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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  10. Feddersen, Timothy J & Pesendorfer, Wolfgang, 1996. "The Swing Voter's Curse," American Economic Review, American Economic Association, vol. 86(3), pages 408-24, June.
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    • Timothy J. Feddersen & Wolfgang Pesendorfer, 1995. "The Swing Voter's Curse," Discussion Papers 1064, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  11. Stephen Coate, 2001. "Political Competition with Campaign Contributions and Informative Advertising," NBER Working Papers 8693, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Timothy Feddersen & Wolfgang Pesendorfer, 1997. "Voting Behavior and Information Aggregation in Elections with Private Information," Econometrica, Econometric Society, vol. 65(5), pages 1029-1058, September.
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  13. Prat, Andrea, 2002. "Campaign Spending with Office-Seeking Politicians, Rational Voters, and Multiple Lobbies," Journal of Economic Theory, Elsevier, vol. 103(1), pages 162-189, March. [Downloadable!] (restricted)
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  1. Thomas Stratmann, 2003. "Tainted Money? Contribution Limits and the Effectiveness of Campaign Spending," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Thomas Stratmann, 2003. "Do Strict Electoral Campaign Finance Rules Limit Corruption?," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 1(1), pages 24-27, 02. [Downloadable!]
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