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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.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9601.

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Date of creation: Apr 2003
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Handle: RePEc:nbr:nberwo:9601

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  1. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
  2. David Kreps & Robert Wilson, 1998. "Sequential Equilibria," Levine's Working Paper Archive 237, David K. Levine.
  3. Prat, A., 1997. "Campaign Advertising and Voter Welfare," Discussion Paper 1997-118, Tilburg University, Center for Economic Research.
  4. 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.
  5. Aragones, Enriqueta & Palfrey, Thomas. R., 2000. "Mixed Equilibrium in a Downsian Model With a Favored Candidate," Working Papers 1102, California Institute of Technology, Division of the Humanities and Social Sciences.
  6. Timothy Feddersen & Wolfgang Pesendorfer, 1997. "Voting Behavior and Information Aggregation in Elections with Private Information," Econometrica, Econometric Society, vol. 65(5), pages 1029-1058, September.
  7. 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.
  8. 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.
  9. Thomas Stratmann, 2006. "Contribution limits and the effectiveness of campaign spending," Public Choice, Springer, vol. 129(3), pages 461-474, December.
  10. Feddersen, Timothy J & Pesendorfer, Wolfgang, 1996. "The Swing Voter's Curse," American Economic Review, American Economic Association, vol. 86(3), pages 408-24, June.
  11. Levitt, Steven D, 1994. "Using Repeat Challengers to Estimate the Effect of Campaign Spending on Election Outcomes in the U.S. House," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 777-98, August.
  12. Prat, A., 1998. "Campaign Spending with Office-Seeking Politicians, Rational Voters and Multiple Lobbies," Discussion Paper 1998-123, Tilburg University, Center for Economic Research.
  13. Timothy Besley & Stephen Coate, 2000. "Issue Unbundling via Citizens' Initiatives," NBER Working Papers 8036, National Bureau of Economic Research, Inc.
  14. Gene Grossman & Elhanan Helpman, 1994. "Electoral Competition and Special Interest Politics," NBER Working Papers 4877, National Bureau of Economic Research, Inc.
  15. Andrea Prat, 2002. "Campaign Advertising and Voter Welfare," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 999-1017.
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Cited by:
  1. Thomas Stratmann, 2003. "Do Strict Electoral Campaign Finance Rules Limit Corruption?," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 1(1), pages 24-27, 02.

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