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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 very optimistic assumptions concerning the role of campaign advertising and the rationality of voters. The optimistic assumptions are 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. The argument also assumes that campaign contributions are provided by interest groups and that candidates can offer to provide policy favors to attract higher contributions.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/0002828041464443
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 94 (2004)
Issue (Month): 3 (June)
Pages: 628-655

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Handle: RePEc:aea:aecrev:v:94:y:2004:i:3:p:628-655
Note: DOI: 10.1257/0002828041464443
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  1. Prat, A., 1998. "Campaign Spending with Office-Seeking Politicians, Rational Voters and Multiple Lobbies," Discussion Paper 1998-123, Tilburg University, Center for Economic Research.
  2. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
  3. Christian Schultz, 2003. "Strategic Campaigns and Redistributive Politics," CESifo Working Paper Series 858, CESifo Group Munich.
  4. David M Kreps & Robert Wilson, 2003. "Sequential Equilibria," Levine's Working Paper Archive 618897000000000813, David K. Levine.
  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. B. Douglas Bernheim & Michael D. Whinston, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 101(1), pages 1-31.
  7. Potters, J.J.M. & Sloof, R. & van Winden, F.A.A.M., 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.
  8. Feddersen, Timothy J & Pesendorfer, Wolfgang, 1996. "The Swing Voter's Curse," American Economic Review, American Economic Association, vol. 86(3), pages 408-24, June.
  9. Thomas Stratmann, 2006. "Contribution limits and the effectiveness of campaign spending," Public Choice, Springer, vol. 129(3), pages 461-474, December.
  10. 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.
  11. David Austen-Smith, 1987. "Interest groups, campaign contributions, and probabilistic voting," Public Choice, Springer, vol. 54(2), pages 123-139, January.
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