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Political Contributions and Insurance

Author

Listed:
  • Bryan Engelhardt

    (Department of Economics, College of the Holy Cross)

  • Justin Svec

    (Department of Economics, College of the Holy Cross)

Abstract

We propose a mechanism that eliminates the incentive for risk-averse agents to influence government policy via political contributions. The mechanism requires the government to create a political insurance exchange where agents can insure against the outcome of a government decision and firms selling insurance announce and commit to a price of insurance and their political contributions. If the exchange contains actuarially fair priced insurance, then the agent fully insures and neither the firm nor agent lobbies the government. The exchange is better than contribution limits because it is welfare-enhancing, more fair, and does not restrict speech.

Suggested Citation

  • Bryan Engelhardt & Justin Svec, 2012. "Political Contributions and Insurance," Working Papers 1204, College of the Holy Cross, Department of Economics.
    • Handle: RePEc:hcx:wpaper:1204
    as

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    File URL: https://hcapps.holycross.edu/hcs/RePEc/hcx/1204-Engelhardt-Svec_PoliticalInsurance.pdf
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    References listed on IDEAS

    as
    1. John M. de Figueiredo & Brian S. Silverman, 2002. "Academic Earmarks and the Returns to Lobbying," NBER Working Papers 9064, National Bureau of Economic Research, Inc.
    2. Stephen Ansolabehere & John M. de Figueiredo & James M. Snyder Jr, 2003. "Why is There so Little Money in U.S. Politics?," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 105-130, Winter.
    3. de Figueiredo, John M & Silverman, Brian S, 2006. "Academic Earmarks and the Returns to Lobbying," Journal of Law and Economics, University of Chicago Press, vol. 49(2), pages 597-625, October.
    4. Gerber, Alan, 1998. "Estimating the Effect of Campaign Spending on Senate Election Outcomes Using Instrumental Variables," American Political Science Review, Cambridge University Press, vol. 92(2), pages 401-411, June.
    5. 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 777-798, August.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Campaign finance; complete markets; insurance; lobbying; political contributions;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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