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Campaign Spending with Office-Seeking Politicians, Rational Voters, and Multiple Lobbies

  • Prat, Andrea

I introduce a microfounded model of campaign finance with office-seeking politicians, a continuum of voters, and a large number of heterogeneous lobbies. Lobbies make contributions to politicians according to a common agency framework. Politicians use contributions to finance their electoral expenditures. Voters are not fooled by electoral expenditures: they are influenced in a way that is consistent with the equilibrium behavior of lobbies and politicians. The model is used to: (i) determine the relation between campaign spending and political deadweight; (ii) show the informational value of lobbies' contributions; (iii) evaluate the welfare implications of restricting campaign spending; and (iv) interpret the empirical finding that campaign expenditures have a very low effect on election outcome. One can say that this model makes the best case in favor of campaign contributions. Nevertheless, under reasonable parameter values, a ban on campaign contributions is welfare-improving.

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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 103 (2002)
Issue (Month): 1 (March)
Pages: 162-189

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Handle: RePEc:eee:jetheo:v:103:y:2002:i:1:p:162-189
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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