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Tainted Money? Contribution Limits and the Effectiveness of Campaign Spending

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  • Thomas Stratmann

Abstract

Campaign expenditures are not effective in increasing candidates’ vote shares if voters do not respond to the advertisement when they believe that campaign expenditures are financed with “tainted money.” In this situation, limiting contributions may reduce the number of policy favors that candidates promise to contributors, and thereby increase the effectiveness of campaign spending. Exploiting cross-state variation in campaign finance laws, this paper tests whether campaign expenditures by state House candidates are more productive in increasing vote shares when candidates run in states that limit contributions. The results show that campaign expenditures by incumbents, challengers, and open seat candidates are more productive when candidates run in states with campaign contribution limits, as opposed to in states without limits. Controlling for the endogeneity of incumbent spending, the study shows that in states with contribution limits, incumbent spending and challenger spending are equally productive, and that spending by both candidates is quantitatively important in increasing their vote shares.

Suggested Citation

  • Thomas Stratmann, 2003. "Tainted Money? Contribution Limits and the Effectiveness of Campaign Spending," CESifo Working Paper Series 1044, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1044
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp1044.pdf
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    2. 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.
    3. Andrea Prat, 2002. "Campaign Advertising and Voter Welfare," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 999-1017.
    4. 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 345-373, October.
    5. 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.
    6. Stratmann, Thomas, 1995. "Campaign Contributions and Congressional Voting: Does the Timing of Contributions Matter?," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 127-136, February.
    7. Ignacio Ortuno-Ortin & Christian Schultz, 2005. "Public Funding of Political Parties," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(5), pages 781-791, December.
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    9. Gene M. Grossman & Elhanan Helpman, 1996. "Electoral Competition and Special Interest Politics," Review of Economic Studies, Oxford University Press, vol. 63(2), pages 265-286.
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    11. Milyo, Jeffrey & Groseclose, Timothy, 1999. "The Electoral Effects of Incumbent Wealth," Journal of Law and Economics, University of Chicago Press, vol. 42(2), pages 699-722, October.
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    14. Daniel, Kermit & Lott, John R, Jr, 1997. "Term Limits and Electoral Competitiveness: Evidence from California's State Legislative Races," Public Choice, Springer, vol. 90(1-4), pages 165-184, March.
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    1. repec:ces:ifodic:v:1:y:2003:i:1:p:14567829 is not listed on IDEAS
    2. Thomas Stratmann, 2003. "Do Strict Electoral Campaign Finance Rules Limit Corruption?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(1), pages 24-27, 02.

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