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Side Effects of Campaign Finance Reform

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  • Matthias Dahm
  • Nicolas Porteiro

Abstract

Since campaign finance reform is usually motivated by the concern that existing legislation can not effectively prevent campaign contributions to ‘buy favors’, this paper assumes that contributions influence political decisions. But, given that it is also widely recognized that interest groups achieve influence by providing political decision makers with policy relevant information, we also assume that lobbies engage in non-negligible informational lobbying. We focus on a single political decision to be taken and offer a simple model in which the optimal influence strategy is a mixture of both lobbying instruments. Our main result is to show that campaign finance reform may have important side effects: It may deter informational lobbying so that less policy relevant information is available and as a result political decisions become less efficient.

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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1408.

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Date of creation: Jul 2005
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Handle: RePEc:nwu:cmsems:1408

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Keywords: party and candidate financing; lobbying; interest groups; experts; information transmission; contributions; influence; political decision making process.;

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References

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  1. Morten Bennedsen & Sven E. Feldmann, 2000. "Informational Lobbying and Political Contributions," CIE Discussion Papers 2000-02, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  2. Matthias Dahm & Nicolás Porteiro, 2006. "Informational Lobbying under the Shadow of Political Pressure," Working Papers 06.14, Universidad Pablo de Olavide, Department of Economics.
  3. Yeon-Koo Che & Ian Gale, 1998. "Caps on Political Lobbying," Microeconomics 9809003, EconWPA.
  4. Prat, Andrea, 1999. "Campaign Advertising and Voter Welfare," CEPR Discussion Papers 2152, C.E.P.R. Discussion Papers.
  5. Stephen Ansolabehere & John M. de Figueiredo & James M. Snyder, 2003. "Why Is There So Little Money in Politics?," NBER Working Papers 9409, National Bureau of Economic Research, Inc.
  6. Morten Bennedsen & Sven E. Feldmann, 2002. "Lobbying Legislatures," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 919-948, August.
  7. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1993. "Rigging the Lobbying Process: An Application of the All-Pay Auction," American Economic Review, American Economic Association, vol. 83(1), pages 289-94, March.
  8. Prat, Andrea, 2002. "Campaign Spending with Office-Seeking Politicians, Rational Voters, and Multiple Lobbies," Journal of Economic Theory, Elsevier, vol. 103(1), pages 162-189, March.
  9. Austen-Smith, David, 1998. "Allocating Access for Information and Contributions," Journal of Law, Economics and Organization, Oxford University Press, vol. 14(2), pages 277-303, October.
  10. Stephen Coate, 2004. "Pareto-Improving Campaign Finance Policy," American Economic Review, American Economic Association, vol. 94(3), pages 628-655, June.
  11. Matejka, M. & Onderstal, A.M. & De Waegenaere, A.M.B., 2002. "The Effectiveness of Caps on Political Lobbying," Discussion Paper 2002-44, Tilburg University, Center for Economic Research.
  12. Stephen Ansolabehere & John M. de Figueiredo & James M. Snyder Jr, 2003. "Why is There so Little Money in U.S. Politics?," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 105-130, Winter.
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Cited by:
  1. Matthias Dahm & Nicolás Porteiro, 2008. "Biased contests," Public Choice, Springer, vol. 136(1), pages 55-67, July.
  2. Cotton, Christopher, 2009. "Should we tax or cap political contributions? A lobbying model with policy favors and access," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 831-842, August.
  3. Cotton, Christopher, 2007. "Informational Lobbying and Competition for Access," MPRA Paper 1842, University Library of Munich, Germany.
  4. Matthias Dahm & Nicolás Porteiro, 2006. "Informational Lobbying under the Shadow of Political Pressure," Working Papers 06.14, Universidad Pablo de Olavide, Department of Economics.
  5. Matthias Dahm & Robert Dur & Amihai Glazer, 2014. "How a firm can induce legislators to adopt a bad policy," Public Choice, Springer, vol. 159(1), pages 63-82, April.
  6. Martin Gregor, 2011. "Corporate lobbying: A review of the recent literature," Working Papers IES 2011/32, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Nov 2011.

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