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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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Publication status: published as Coate, Stephen. "Pareto-Improving Campaign Finance Policy," American Economic Review, 2004, v94(3,Jun), 628-655.
Handle: RePEc:nbr:nberwo:9601

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  1. Timothy Besley & Stephen Coate, 2000. "Issue Unbundling via Citizens' Initiatives," NBER Working Papers 8036, National Bureau of Economic Research, Inc.
  2. Rebecca Morton & Charles Cameron, 1992. "Elections And The Theory Of Campaign Contributions: A Survey And Critical Analysis," Economics and Politics, Wiley Blackwell, Wiley Blackwell, vol. 4(1), pages 79-108, 03.
  3. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers, Princeton, Woodrow Wilson School - Public and International Affairs 162, Princeton, Woodrow Wilson School - Public and International Affairs.
  4. Enriqueta Aragon├ęs & Thomas R. Palfrey, 2000. "Mixed equilibrium in a Downsian model with a favored candidate," Economics Working Papers 502, Department of Economics and Business, Universitat Pompeu Fabra.
  5. Timothy J. Feddersen & Wolfgang Pesendorfer, 1995. "The Swing Voter's Curse," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1064, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Gene Grossman & Elhanan Helpman, 1994. "Electoral Competition and Special Interest Politics," NBER Working Papers 4877, National Bureau of Economic Research, Inc.
  7. Andrea Prat, 2002. "Campaign Advertising and Voter Welfare," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 999-1017.
  8. David M Kreps & Robert Wilson, 2003. "Sequential Equilibria," Levine's Working Paper Archive 618897000000000813, David K. Levine.
  9. David Austen-Smith, 1987. "Interest groups, campaign contributions, and probabilistic voting," Public Choice, Springer, vol. 54(2), pages 123-139, January.
  10. 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.
  11. Thomas Stratmann, 2006. "Contribution limits and the effectiveness of campaign spending," Public Choice, Springer, vol. 129(3), pages 461-474, December.
  12. 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, University of Chicago Press, vol. 102(4), pages 777-98, August.
  13. Timothy Feddersen & Wolfgang Pesendorfer, 1997. "Voting Behavior and Information Aggregation in Elections with Private Information," Econometrica, Econometric Society, Econometric Society, vol. 65(5), pages 1029-1058, September.
  14. Stephen Coate, 2004. "Political Competition with Campaign Contributions and Informative Advertising," Journal of the European Economic Association, MIT Press, MIT Press, vol. 2(5), pages 772-804, 09.
  15. Prat, A., 1998. "Campaign Spending with Office-Seeking Politicians, Rational Voters and Multiple Lobbies," Discussion Paper, Tilburg University, Center for Economic Research 1998-123, Tilburg University, Center for Economic Research.
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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, Ifo Institute for Economic Research at the University of Munich, vol. 1(1), pages 24-27, 02.

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  2. Dana kampanye in Wikipedia Indonesian ne '')

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