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Do Campaign Finance Policies Really Improve Voters' Welfare?

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Author Info

  • 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.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper209.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 209.

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Length: 37 pages
Date of creation: Apr 2011
Date of revision: Apr 2011
Handle: RePEc:mib:wpaper:209

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Related research

Keywords: Campaign Finance; Interest Groups; Elections; Welfare;

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References

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  1. David M Kreps & Robert Wilson, 2003. "Sequential Equilibria," Levine's Working Paper Archive 618897000000000813, David K. Levine.
  2. 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.
  3. Prat, Andrea, 2002. "Campaign Advertising and Voter Welfare," Review of Economic Studies, Wiley Blackwell, vol. 69(4), pages 999-1017, October.
  4. 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.
  5. Thomas Stratmann, 2009. "How prices matter in politics: the returns to campaign advertising," Public Choice, Springer, vol. 140(3), pages 357-377, September.
  6. Christian Schultz, 2007. "Strategic Campaigns and Redistributive Politics," Economic Journal, Royal Economic Society, vol. 117(522), pages 936-963, 07.
  7. Prat, A., 1998. "Campaign Spending with Office-Seeking Politicians, Rational Voters and Multiple Lobbies," Discussion Paper 1998-123, Tilburg University, Center for Economic Research.
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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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