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

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  • Stephen Coate

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.

Suggested Citation

  • Stephen Coate, 2003. "Power-hungry Candidates, Policy Favors, and Pareto Improving Campaign Finance Policy," NBER Working Papers 9601, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:9601
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    References listed on IDEAS

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    10. Stephen Coate, 2004. "Political Competition with Campaign Contributions and Informative Advertising," Journal of the European Economic Association, MIT Press, vol. 2(5), pages 772-804, September.
    11. Aragones, Enriqueta & Palfrey, Thomas R., 2002. "Mixed Equilibrium in a Downsian Model with a Favored Candidate," Journal of Economic Theory, Elsevier, vol. 103(1), pages 131-161, March.
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    Cited by:

    1. repec:ces:ifodic:v:1:y:2003:i:1:p:14567829 is not listed on IDEAS
    2. Panu Poutvaara & Tuomas Takalo, 2007. "Candidate quality," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(1), pages 7-27, February.
    3. Thomas Stratmann, 2003. "Do Strict Electoral Campaign Finance Rules Limit Corruption?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(1), pages 24-27, 02.
    4. Thomas Stratmann, 2003. "Do Strict Electoral Campaign Finance Rules Limit Corruption?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(01), pages 24-27, February.

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    More about this item

    JEL classification:

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

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