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Political Competition with Campaign Contributions and Informative Advertising

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  • Stephen Coate

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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Bibliographic Info

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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Publication status: published as 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, 09.
Handle: RePEc:nbr:nberwo:8693

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  1. Torsten Persson & Guido Tabellini, . "Political Economics and Macroeconomic Policy," Working Papers 121, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. Ignacio Ortuno-Ortin & Christian Schultz, 2005. "Public Funding of Political Parties," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(5), pages 781-791, December.
  3. Prat, A., 1998. "Campaign Spending with Office-Seeking Politicians, Rational Voters and Multiple Lobbies," Discussion Paper 1998-123, Tilburg University, Center for Economic Research.
  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. Besley, Timothy J. & Coate, Stephen, 2001. "Issue Unbundling via Citizens' initiatives," CEPR Discussion Papers 2857, C.E.P.R. Discussion Papers.
  6. 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 Behavior," Discussion Paper 1997-27, Tilburg University, Center for Economic Research.
  7. Tim Besley & Stephen Coate, . ""An Economic Model of Representative Democracy''," CARESS Working Papres 95-02, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  8. Andrea Prat, 2002. "Campaign Advertising and Voter Welfare," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 999-1017.
  9. David Austen-Smith, 1987. "Interest groups, campaign contributions, and probabilistic voting," Public Choice, Springer, vol. 54(2), pages 123-139, January.
  10. 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.
  11. 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.
  12. Gene Grossman & Elhanan Helpman, 1994. "Electoral Competition and Special Interest Politics," NBER Working Papers 4877, National Bureau of Economic Research, Inc.
  13. Nelson, Phillip, 1976. "Political Information," Journal of Law and Economics, University of Chicago Press, vol. 19(2), pages 315-36, August.
  14. Grossman, Gene M & Shapiro, Carl, 1984. "Informative Advertising with Differentiated Products," Review of Economic Studies, Wiley Blackwell, vol. 51(1), pages 63-81, January.
  15. Roger Congleton, 1986. "Rent-seeking aspects of political advertising," Public Choice, Springer, vol. 49(3), pages 249-263, January.
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