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Political Competition with Campaign Contributions and Informative Advertising

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  • Stephen Coate
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Abstract

This paper presents a model of political competition with campaign contributions and informative political advertising. Policy-motivated parties compete by selecting candidates and interest groups provide contributions to enhance the electoral prospects of like-minded candidates. Contributions are used to finance advertising campaigns that provide voters with information about candidates' ideologies. The model embodies rational behavior on the part of all actors, is analytically tractable, and has a unique equilibrium. The paper uses the model to analyze the welfare economics of contribution limits. Such limits are shown to redistribute welfare from moderate voters to interest group members. They may or may not raise aggregate welfare.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8693.

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Date of creation: Dec 2001
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Handle: RePEc:nbr:nberwo:8693

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  1. Persson, Torsten & Tabellini, Guido, 1997. "Political Economics and Macroeconomic Policy," CEPR Discussion Papers 1759, C.E.P.R. Discussion Papers.
  2. Prat, A., 1997. "Campaign Advertising and Voter Welfare," Discussion Paper 1997-118, Tilburg University, Center for Economic Research.
  3. Christian Schultz & Ignacio Ortuno-OrtÍn, 2000. "Public Funding of Political Parties," CESifo Working Paper Series 368, CESifo Group Munich.
  4. Osborne, Martin J & Slivinski, Al, 1996. "A Model of Political Competition with Citizen-Candidates," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 65-96, February.
  5. Grossman, Gene M & Shapiro, Carl, 1984. "Informative Advertising with Differentiated Products," Review of Economic Studies, Wiley Blackwell, vol. 51(1), pages 63-81, January.
  6. Rebecca Morton & Charles Cameron, 1992. "Elections And The Theory Of Campaign Contributions: A Survey And Critical Analysis," Economics and Politics, Wiley Blackwell, vol. 4(1), pages 79-108, 03.
  7. Nelson, Phillip, 1976. "Political Information," Journal of Law and Economics, University of Chicago Press, vol. 19(2), pages 315-36, August.
  8. Paul R. Milgrom & John Roberts, 1984. "Price and Advertising Signals of Product Quality," Cowles Foundation Discussion Papers 709, Cowles Foundation for Research in Economics, Yale University.
  9. Potters, J.J.M. & Sloof, R. & Winden, F.A.A.M. van, 1997. "Campaign expenditures, contributions and direct endorsements. The strategic use of information and money to influence voter behaviour," Open Access publications from Tilburg University urn:nbn:nl:ui:12-73909, Tilburg University.
  10. Tim Besley & Stephen Coate, . "An Economic Model of Representative Democracy," Penn CARESS Working Papers ecf70d639d700dba5327ab0c8, Penn Economics Department.
  11. Prat, A., 1998. "Campaign Spending with Office-Seeking Politicians, Rational Voters and Multiple Lobbies," Discussion Paper 1998-123, Tilburg University, Center for Economic Research.
  12. Timothy Besley & Stephen Coate, 2000. "Issue Unbundling via Citizens' Initiatives," NBER Working Papers 8036, National Bureau of Economic Research, Inc.
  13. Gene Grossman & Elhanan Helpman, 1994. "Electoral Competition and Special Interest Politics," NBER Working Papers 4877, National Bureau of Economic Research, Inc.
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