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Party Competition under Private and Public Financing: A Comparison of Institutions

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  • Roemer John E

    () (Yale University)

Abstract

We propose a theory of party competition (two parties, single-issue) where citizens acquire party membership by contributing money to a party, and where a member’s influence on the policy taken by her party is proportional to her campaign contribution. The polity consists of informed and uninformed voters: only informed voters join parties, and the party campaign chest, the sum of its received contributions, is used to reach uninformed voters through advertising. A party is a cooperative organization of its members. Parties compete with each other strategically with respect to policy choice and advertising. We propose a definition of political equilibrium, in which party membership, citizen contributions, and parties’ policies are simultaneously determined, for each of four financing institutions, running the gamut between a purely private, unconstrained system, to a public system in which all citizens have equal financial input. Equilibria under these institutions are computed by simulation for an example. The representation and welfare properties of these four institutions are compared from these simulations.

Suggested Citation

  • Roemer John E, 2006. "Party Competition under Private and Public Financing: A Comparison of Institutions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 6(1), pages 1-31, April.
  • Handle: RePEc:bpj:bejtec:v:advances.6:y:2006:i:1:n:2
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    References listed on IDEAS

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    1. Faulhaber, Gerald R, 1975. "Cross-Subsidization: Pricing in Public Enterprises," American Economic Review, American Economic Association, pages 966-977.
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    Cited by:

    1. Loeper, Antoine, 2011. "Coordination in heterogeneous federal systems," Journal of Public Economics, Elsevier, pages 900-912.
    2. Campante, Filipe R., 2011. "Redistribution in a model of voting and campaign contributions," Journal of Public Economics, Elsevier, pages 646-656.
    3. Bugarin, Maurício & Portugal, Adriana & Sakurai, Sérgio, 2008. "Inequality and Cost of Electoral Campaigns in Latin America," Insper Working Papers wpe_152, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
    4. Jenny De Freitas, 2009. "Political support for the private system to finance political parties," DEA Working Papers 35, Universitat de les Illes Balears, Departament d'Economía Aplicada.

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