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Do Campaign Finance Policies Really Improve Voters' Welfare?

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  • Filippo Gregorini
  • Filippo Pavesi

Abstract

In an electoral race, interest groups will be willing to finance political candidates’ campaigns in return for favors that are costly to voters. Starting from the empirical observation of split contributions, we develop a theoretical model of directly informative campaign advertising with rational voters. In this setting, interest groups that demand more favors are less likely to finance candidates to enhance their electoral prospects. We find that the only feasible Pareto improving policy involves providing specific limits and subsidies to each candidate. Unfortunately, this policy is very demanding in terms of information for the policy maker and always involves candidates providing favors to interest groups. We argue that bans on contributions without public subsidies may not be welfare improving, since they negatively affect the informational value of advertisements.

Suggested Citation

  • Filippo Gregorini & Filippo Pavesi, 2011. "Do Campaign Finance Policies Really Improve Voters' Welfare?," Working Papers 209, University of Milano-Bicocca, Department of Economics, revised Apr 2011.
  • Handle: RePEc:mib:wpaper:209
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    References listed on IDEAS

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    Cited by:

    1. Thomas Bassetti & Filippo Pavesi, 2012. "Deep Pockets, Extreme Preferences: Interest Groups and Campaign Finance Contributions," Working Papers 222, University of Milano-Bicocca, Department of Economics, revised Apr 2012.

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    More about this item

    Keywords

    Campaign Finance; Interest Groups; Elections; Welfare;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H40 - Public Economics - - Publicly Provided Goods - - - General

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