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Money and votes: A simultaneous equation model


  • W. Welch


This paper has specified and estimated a model of the interaction between money and voting in American politics. Convincingly establishing the identification of a system of equations can be difficult even when theory provides a guide. In the study of money in politics, however, no theoretical perspective has been established in the literature. To make the case for identification as unambiguous as possible, this paper has done two things. First, the specification was based, in part, on theory which has formally been developed elsewhere and which satisfactorily describes data at the economic interest group level (Welch, 1980). Second, part of the question of identification revolves around the relationship between party strength and socioeconomic variables. Because there are questions as to the best measurement of party strength, results based on two measures were presented. For a number of reasons, the Presidential vote was the preferred measure. This study draws four conclusions. First, money influenced voting in U.S. House elections in 1972, although its effect was ‘small’. Second, patterns of total contributions to a U.S. House candidate are consistent with the hypothesis that a majority of dollars come from contributors who prefer to support likely winners. Third, the total contributions made to a candidate are a positive function of the district's median years of schooling completed and the Gini coefficient. Total contributions made to a Democratic candidate are also a positive function of the median income. Finally, had House campaigns been financed in the early 1970s, even to the point of giving each major party candidate $150,000 (in 1978 dollars), few elections would have been changed. It is also worth mentioning some of the things about the financing of political campaigns that we still do not know. The above conclusions involve only elections to the U.S. House; there are good reasons for suspecting that money is more influential in U.S. Senate elections. OLS statistics support this belief and the greater visibility of those races help justify it. Although money has little effect on House elections, we do not know whether contributions affect legislative voting in the House. Representatives apparently believe that expenditure influences their reelection chances. Given the complexity of the process, it should be no surprise that this belief conflicts with our findings. Acting on this belief, a Representative's vote may very well be influenced by the sources of his contributions, either directly or indirectly through the giving of access to contributors. Finally, we should be reminded that the above model is static while the electoral process is dynamic. The amount contributed to a candidate is affected by his probability of winning in the previous time period (e.g. week, month) and in turn affects that probability in the following time period. As usual, what we know is overshadowed by what we do not know. The above questions are both interesting in their own right and of interest to policy making. Copyright Martinus Nijhoff Publishers 1981

Suggested Citation

  • W. Welch, 1981. "Money and votes: A simultaneous equation model," Public Choice, Springer, vol. 36(2), pages 209-234, January.
  • Handle: RePEc:kap:pubcho:v:36:y:1981:i:2:p:209-234
    DOI: 10.1007/BF00123781

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    References listed on IDEAS

    1. Nelson, Phillip, 1976. "Political Information," Journal of Law and Economics, University of Chicago Press, vol. 19(2), pages 315-336, August.
    2. Benjamin Bental & Uri Ben-Zion, 1975. "Political contribution and policy — Some extensions," Public Choice, Springer, vol. 24(1), pages 1-12, December.
    3. Pindyck, Robert S, 1979. "The Cartelization of World Commodity Markets," American Economic Review, American Economic Association, vol. 69(2), pages 154-158, May.
    4. Palda, Kristian S, 1975. "The Effect of Expenditure on Political Success," Journal of Law and Economics, University of Chicago Press, vol. 18(3), pages 745-771, December.
    5. Jonathan Silberman, 1976. "A comment on the economics of campaign funds," Public Choice, Springer, vol. 25(1), pages 69-73, March.
    6. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135-135.
    7. Abrams, Burton A & Settle, Russell F, 1978. "The Economic Theory of Regulation and Public Financing of Presidential Elections," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages 245-257, April.
    8. W. Welch, 1980. "The allocation of political monies: Economic interest groups," Public Choice, Springer, vol. 35(1), pages 97-120, January.
    9. Crain, W Mark & Deaton, Thomas H & Tollison, Robert D, 1977. "Legislators as Taxicabs: On the Value of Seats in the U.S. House of Representatives," Economic Inquiry, Western Economic Association International, vol. 15(2), pages 298-302, April.
    10. R. Johnston, 1978. "Campaign spending and votes: a reconsideration," Public Choice, Springer, vol. 33(3), pages 83-92, January.
    11. Abrams, Burton A & Settle, Russell F, 1976. "The Effect of Broadcasting on Political Campaign Spending: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 1095-1107, October.
    12. Albert Breton, 1974. "The economic theory of representative government: A reply," Public Choice, Springer, vol. 20(1), pages 129-133, December.
    13. Russell Pittman, 1977. "Market structure and campaign contributions," Public Choice, Springer, vol. 31(1), pages 37-52, September.
    14. repec:cup:apsrev:v:72:y:1978:i:02:p:469-491_15 is not listed on IDEAS
    15. Palda, Kristian S, 1975. "The Effect of Expenditure on Political Success: Reply," Journal of Law and Economics, University of Chicago Press, vol. 18(3), pages 779-780, December.
    16. Feldstein, Martin & Clotfelter, Charles, 1976. "Tax incentives and charitable contributions in the United States : A microeconometric analysis," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 1-26.
    17. Uri Ben-Zion & Zeev Eytan, 1974. "On money, votes, and policy in a democratic society," Public Choice, Springer, vol. 17(1), pages 1-10, March.
    18. Reece, William S, 1979. "Charitable Contributions: New Evidence on Household Behavior," American Economic Review, American Economic Association, vol. 69(1), pages 142-151, March.
    19. J. Fred Giertz & Dennis Sullivan, 1977. "Campaign expenditures and election outcomes: A critical note," Public Choice, Springer, vol. 31(1), pages 157-162, September.
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    Cited by:

    1. Kevin Grier, 1989. "Campaign spending and Senate elections, 1978–84," Public Choice, Springer, vol. 63(3), pages 201-219, December.
    2. Al Wilhite, 1988. "Political parties, campaign contributions and discrimination," Public Choice, Springer, vol. 58(3), pages 259-268, September.
    3. Bernardo S. Da Silveira & João M. P. De Mello, 2011. "Campaign Advertising and Election Outcomes: Quasi-natural Experiment Evidence from Gubernatorial Elections in Brazil," Review of Economic Studies, Oxford University Press, vol. 78(2), pages 590-612.
    4. Gershon Alperovich, 1984. "The economics of choice in the allocation of intergovernmental grants to local authories," Public Choice, Springer, vol. 44(2), pages 285-296, January.
    5. Pastine, Ivan & Pastine, Tuvana, 2012. "Incumbency advantage and political campaign spending limits," Journal of Public Economics, Elsevier, vol. 96(1), pages 20-32.
    6. Martial Foucault & Abel François, 2005. "Le rendement des dépenses électorales en France," Post-Print hal-00126910, HAL.
    7. Gerald Keim & Asghar Zardkoohi, 1988. "Looking for leverage in PAC markets: Corporate and labor contributions considered," Public Choice, Springer, vol. 58(1), pages 21-34, July.
    8. Sung-Kyu Lee, 2013. "The Effects of Election Advertising Spending and Incumbency on the General Election Results in Great Britain," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 97-118, May.
    9. Potters, Jan & Sloof, Randolph, 1996. "Interest groups: A survey of empirical models that try to assess their influence," European Journal of Political Economy, Elsevier, vol. 12(3), pages 403-442, November.
    10. W. Crain & Robert Tollison & Donald Leavens, 1988. "Laissez-faire in campaign finance," Public Choice, Springer, vol. 56(3), pages 201-212, March.
    11. Ovtchinnikov, Alexei V. & Pantaleoni, Eva, 2012. "Individual political contributions and firm performance," Journal of Financial Economics, Elsevier, vol. 105(2), pages 367-392.
    12. 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 777-798, August.

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