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Campaign Spending with Office-Seeking Politicians, Rational Voters and Multiple Lobbies

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  • Prat, A.

    (Tilburg University, Center for Economic Research)

Abstract

I introduce a microfounded model of campaign finance with office-seeking politicians, a continuum of voters, and a large number of heterogeneous lobbies. Lobbies make contributions to politicians according to a common agency framework. Politicians use contributions to finance their electoral expenditures. Voters are not fooled by electoral expenditures: they are influenced in a way that is consistent with the equilibrium behavior of lobbies and politicians. The model is used to: (i) determine the relation between campaign spending and political deadweight; (ii) show the informational value of lobbies' contributions; (iii) evaluate the welfare implications of restricting campaign spending; and (iv) interpret the empirical finding that campaign expenditures have a very low effect on election outcome. One can say that this model makes the best case in favor of campaign contributions. Nevertheless, under reasonable parameter values, a ban on campaign contributions is welfare-improving.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 1998-123.

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Date of creation: 1998
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Handle: RePEc:dgr:kubcen:1998123

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