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Side Effects of Campaign Finance Reform

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  • Matthias Dahm

    ()
    (Universidad Carlos III de Madrid)

  • Nicolás Porteiro

    ()
    (Department of Economics, Universidad Pablo de Olavide)

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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File URL: http://www.upo.es/serv/bib/wps/econ0615.pdf
File Function: First version, 2006
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Bibliographic Info

Paper provided by Universidad Pablo de Olavide, Department of Economics in its series Working Papers with number 06.15.

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Length: 38 pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:pab:wpaper:06.15

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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. 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.
  2. 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, American Economic Association, vol. 83(1), pages 289-94, March.
  3. Prat, Andrea, 1999. "Campaign Advertising and Voter Welfare," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2152, C.E.P.R. Discussion Papers.
  4. Bennedsen, Morten & Feldmann, Sven E., 2000. "Informational Lobbying And Political Contributions," Working Papers, Copenhagen Business School, Department of Economics 08-2000, Copenhagen Business School, Department of Economics.
  5. Morten Bennedsen & Sven E. Feldmann, 2002. "Lobbying Legislatures," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 110(4), pages 919-948, August.
  6. 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.
  7. Matejka, M. & Onderstal, A.M. & De Waegenaere, A.M.B., 2002. "The Effectiveness of Caps on Political Lobbying," Discussion Paper, Tilburg University, Center for Economic Research 2002-44, Tilburg University, Center for Economic Research.
  8. Che, Yeon-Koo & Gale, Ian L, 1998. "Caps on Political Lobbying," American Economic Review, American Economic Association, American Economic Association, vol. 88(3), pages 643-51, June.
  9. Austen-Smith, David, 1998. "Allocating Access for Information and Contributions," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 14(2), pages 277-303, October.
  10. Matthias Dahm & Nicolás Porteiro, 2008. "Informational lobbying under the shadow of political pressure," Social Choice and Welfare, Springer, Springer, vol. 30(4), pages 531-559, May.
  11. 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, American Economic Association, vol. 17(1), pages 105-130, Winter.
  12. Stephen Coate, 2004. "Pareto-Improving Campaign Finance Policy," American Economic Review, American Economic Association, American Economic Association, vol. 94(3), pages 628-655, June.
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Citations

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Cited by:
  1. Matthias Dahm & Nicolas Porteiro, 2005. "Informational Lobbying under the Shadow of Political Pressure," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1409, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Matthias Dahm & Robert Dur & Amihai Glazer, 2014. "How a firm can induce legislators to adopt a bad policy," Public Choice, Springer, Springer, vol. 159(1), pages 63-82, April.
  3. Matthias Dahm & Nicolás Porteiro, 2008. "Biased contests," Public Choice, Springer, Springer, vol. 136(1), pages 55-67, July.
  4. Cotton, Christopher, 2007. "Informational Lobbying and Competition for Access," MPRA Paper 1842, University Library of Munich, Germany.
  5. Cotton, Christopher, 2009. "Should we tax or cap political contributions? A lobbying model with policy favors and access," Journal of Public Economics, Elsevier, Elsevier, vol. 93(7-8), pages 831-842, August.
  6. Martin Gregor, 2011. "Corporate lobbying: A review of the recent literature," Working Papers IES, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies 2011/32, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Nov 2011.

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