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Selling favors in the lab: experiments on campaign finance reform

  • Daniel Houser

    ()

  • Thomas Stratmann

    ()

Substantial academic interest and public policy debate centers on campaign finance reform. Campaign resources can provide benefits to constituencies if candidates use them to fund the distribution of useful information. On the other hand, voters can potentially be harmed if candidates trade policy favors to special interests in exchange for contributions. Unfortunately, because informative field data on this topic are very difficult to obtain, the effects of different campaign finance strategies on election outcomes and economic welfare remain largely uninformed by empirical analyses. This paper reports data from novel laboratory experiments designed to shed light on the campaign finance debate. Our experiment is based on a model where power-hungry candidates are motivated to trade favors for campaign contributions. Our data is consistent with the model’s predictions. We find that voters’ revise their beliefs in response to candidate advertising in a way that is consistent with theory. Moreover, in relation to privately financed electoral competitions, in publicly financed campaigns (i) high-quality candidates are elected more frequently, and (ii) margins of victory are larger. Both of these outcomes are predicted by theory. We conduct policy experiments on various campaign finance strategies, including the widely suggested caps on private fundraising. Our results suggest that caps can improve voter welfare but do not increase the likelihood that high-quality candidates will be elected.

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File URL: http://hdl.handle.net/10.1007/s11127-008-9292-z
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Article provided by Springer in its journal Public Choice.

Volume (Year): 136 (2008)
Issue (Month): 1 (July)
Pages: 215-239

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Handle: RePEc:kap:pubcho:v:136:y:2008:i:1:p:215-239
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  1. Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
  2. Stratmann, Thomas, 2002. "Can Special Interests Buy Congressional Votes? Evidence from Financial Services Legislation," Journal of Law and Economics, University of Chicago Press, vol. 45(2), pages 345-73, October.
  3. Potters, J.J.M. & Sloof, R. & Winden, F.A.A.M. van, 1997. "Campaign Expenditures, Contributions and Direct Endorsements: The Strategic Use of Information and Money to Influence Voter Behavior," Discussion Paper 1997-27, .
  4. Wittman, Donald, 2007. "Candidate quality, pressure group endorsements and the nature of political advertising," European Journal of Political Economy, Elsevier, vol. 23(2), pages 360-378, June.
  5. Christian Schultz, 2003. "Strategic Campaigns and Redistributive Politics," CESifo Working Paper Series 858, CESifo Group Munich.
  6. 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.
  7. Prat, Andrea, 1999. "Campaign Advertising and Voter Welfare," CEPR Discussion Papers 2152, C.E.P.R. Discussion Papers.
  8. Daniel Houser & Robert Kurzban, 2002. "Revisiting Kindness and Confusion in Public Goods Experiments," American Economic Review, American Economic Association, vol. 92(4), pages 1062-1069, September.
  9. Levitt, Steven D, 1994. "Using Repeat Challengers to Estimate the Effect of Campaign Spending on Election Outcomes in the U.S. House," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 777-98, August.
  10. Potters, Jan & Sloof, Randolph & van Winden, Frans, 1997. "Campaign expenditures, contributions and direct endorsements: The strategic use of information and money to influence voter behavior," European Journal of Political Economy, Elsevier, vol. 13(1), pages 1-31, February.
  11. Daniel Houser & Michael Keane & Kevin McCabe, 2002. "Behavior in a dynamic decision problem: An analysis of experimental evidence using a bayesian type classification algorithm," Experimental 0211001, EconWPA.
  12. Stratmann, Thomas, 1998. "The Market for Congressional Votes: Is Timing of Contributions Everything?," Journal of Law and Economics, University of Chicago Press, vol. 41(1), pages 85-113, April.
  13. Gene Grossman & Elhanan Helpman, 1994. "Electoral Competition and Special Interest Politics," NBER Working Papers 4877, National Bureau of Economic Research, Inc.
  14. Stephen Coate, 2004. "Pareto-Improving Campaign Finance Policy," American Economic Review, American Economic Association, vol. 94(3), pages 628-655, June.
  15. Thomas Stratmann, 2006. "Contribution limits and the effectiveness of campaign spending," Public Choice, Springer, vol. 129(3), pages 461-474, December.
  16. 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.
  17. 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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