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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.

Suggested Citation

  • Stephen Coate, 2004. "Pareto-Improving Campaign Finance Policy," American Economic Review, American Economic Association, vol. 94(3), pages 628-655, June.
    • Handle: RePEc:aea:aecrev:v:94:y:2004:i:3:p:628-655
    Note: DOI: 10.1257/0002828041464443
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    References listed on IDEAS

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    8. David Austen-Smith, 1987. "Interest groups, campaign contributions, and probabilistic voting," Public Choice, Springer, vol. 54(2), pages 123-139, January.
    9. Feddersen, Timothy J & Pesendorfer, Wolfgang, 1996. "The Swing Voter's Curse," American Economic Review, American Economic Association, vol. 86(3), pages 408-424, June.
    10. 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.
    11. Thomas Stratmann, 2006. "Contribution limits and the effectiveness of campaign spending," Public Choice, Springer, vol. 129(3), pages 461-474, December.
    12. 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.
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