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Side Effects of Campaign Finance Reform

Author

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  • Matthias Dahm
  • Nicolás Porteiro

Abstract

Because campaign finance reform is usually motivated by the concern that existing legislation cannot effectively prevent campaign contributions to "buy favors," this article assumes that contributions influence political decisions. But, given that it is also widely recognized that interest groups achieve influence by providing political decision makers with policy relevant information, we also assume that lobbies engage in non-negligible informational lobbying. We focus on a single political decision to be taken and offer a simple model in which the optimal influence strategy is a mixture of both lobbying instruments. Our main result is to show that campaign finance reform may have important side effects: It may deter informational lobbying so that less policy relevant information is available and as a result political decisions become less efficient. (JEL: C72, D72) (c) 2008 by the European Economic Association.

Suggested Citation

  • Matthias Dahm & Nicolás Porteiro, 2008. "Side Effects of Campaign Finance Reform," Journal of the European Economic Association, MIT Press, vol. 6(5), pages 1057-1077, September.
  • Handle: RePEc:tpr:jeurec:v:6:y:2008:i:5:p:1057-1077
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    References listed on IDEAS

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    1. Stephen Ansolabehere & John M. de Figueiredo & James M. Snyder, 2003. "Why Is There So Little Money in Politics?," NBER Working Papers 9409, National Bureau of Economic Research, Inc.
    2. Matthias Dahm & Nicolás Porteiro, 2008. "Informational lobbying under the shadow of political pressure," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 30(4), pages 531-559, May.
    3. Andrea Prat, 2002. "Campaign Advertising and Voter Welfare," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 999-1017.
    4. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1993. "Rigging the Lobbying Process: An Application of the All-Pay Auction," American Economic Review, American Economic Association, vol. 83(1), pages 289-294, March.
    5. Bennedsen, Morten & Feldmann, Sven E., 2006. "Informational lobbying and political contributions," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 631-656, May.
    6. Che, Yeon-Koo & Gale, Ian L, 1998. "Caps on Political Lobbying," American Economic Review, American Economic Association, vol. 88(3), pages 643-651, June.
    7. 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.
    8. Matejka, M. & Onderstal, A.M. & De Waegenaere, A.M.B., 2002. "The Effectiveness of Caps on Political Lobbying," Discussion Paper 2002-44, Tilburg University, Center for Economic Research.
    9. Morten Bennedsen & Sven E. Feldmann, 2002. "Lobbying Legislatures," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 919-948, August.
    10. Stephen Coate, 2004. "Pareto-Improving Campaign Finance Policy," American Economic Review, American Economic Association, vol. 94(3), pages 628-655, June.
    11. Stephen Ansolabehere & John M. de Figueiredo & James M. Snyder Jr, 2003. "Why is There so Little Money in U.S. Politics?," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 105-130, Winter.
    12. Austen-Smith, David, 1998. "Allocating Access for Information and Contributions," Journal of Law, Economics, and Organization, Oxford University Press, vol. 14(2), pages 277-303, October.
    13. repec:cup:apsrev:v:84:y:1990:i:02:p:417-438_19 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Cotton, Christopher, 2007. "Informational Lobbying and Competition for Access," MPRA Paper 1842, University Library of Munich, Germany.
    2. Dahm, Matthias & Dur, Robert & Glazerz, Amihai, 2009. "Lobbying of Firms by Voters," Working Papers 2072/43869, Universitat Rovira i Virgili, Department of Economics.
    3. Christopher S. Cotton & Arnaud Déllis, 2016. "Informational Lobbying and Agenda Distortion," Journal of Law, Economics, and Organization, Oxford University Press, vol. 32(4), pages 762-793.
    4. Matthias Dahm & Nicolás Porteiro, 2008. "Informational lobbying under the shadow of political pressure," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 30(4), pages 531-559, May.
    5. Martin Gregor, 2016. "Tullock's Puzzle in Pay-and-Play Lobbying," Economics and Politics, Wiley Blackwell, vol. 28(3), pages 368-389, November.
    6. Gregor Martin, 2015. "To Invite or Not to Invite a Lobby, That Is the Question," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 15(2), pages 143-166, July.
    7. Matthias Dahm & Nicolás Porteiro, 2008. "Biased contests," Public Choice, Springer, vol. 136(1), pages 55-67, July.
    8. Cotton, Christopher, 2009. "Should we tax or cap political contributions? A lobbying model with policy favors and access," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 831-842, August.
    9. Christopher Cotton & Cheng Li, 2016. "Clueless Politicians," Working Papers 1341, Queen's University, Department of Economics.
    10. Martin Gregor, 2014. "Receiver's access fee for a single sender," Working Papers IES 2014/17, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised May 2014.
    11. Martin Gregor, 2014. "Access fees for competing lobbies," Working Papers IES 2014/22, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jul 2014.
    12. Martin Gregor, 2011. "Corporate lobbying: A review of the recent literature," Working Papers IES 2011/32, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Nov 2011.
    13. Matthias Dahm & Robert Dur & Amihai Glazer, 2014. "How a firm can induce legislators to adopt a bad policy," Public Choice, Springer, vol. 159(1), pages 63-82, April.
    14. Arnaud Dellis & Mandar Oak, 2016. "Overlobbying and Pareto-improving Agenda Constraint," School of Economics Working Papers 2016-05, University of Adelaide, School of Economics.

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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