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Selling Favors in the Lab: Experiments on Campaign Finance Reform

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  • Daniel Houser
  • Thomas Stratmann

Abstract

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.

Suggested Citation

  • Daniel Houser & Thomas Stratmann, 2006. "Selling Favors in the Lab: Experiments on Campaign Finance Reform," CESifo Working Paper Series 1727, CESifo.
  • Handle: RePEc:ces:ceswps:_1727
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    Cited by:

    1. Köppl-Turyna, Monika, 2014. "Campaign finance regulations and policy convergence: The role of interest groups and valence," European Journal of Political Economy, Elsevier, vol. 33(C), pages 1-19.
    2. Emir Kamenica & Louisa Egan Brad, 2014. "Voters, dictators, and peons: expressive voting and pivotality," Public Choice, Springer, vol. 159(1), pages 159-176, April.
    3. William Pyle & Laura Solanko, 2013. "The composition and interests of Russia’s business lobbies: testing Olson’s hypothesis of the “encompassing organization”," Public Choice, Springer, vol. 155(1), pages 19-41, April.
    4. Marie-Claire Villeval, 2007. "Experimental Economics: Contributions, Recent Developments, and New Challenges," Working Papers 0706, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    5. Baghdasaryan, Vardan & Iannantuoni, Giovanna & Maggian, Valeria, 2019. "Electoral fraud and voter turnout: An experimental study," European Journal of Political Economy, Elsevier, vol. 58(C), pages 203-219.
    6. Thomas Stratmann, 2006. "Contribution limits and the effectiveness of campaign spending," Public Choice, Springer, vol. 129(3), pages 461-474, December.
    7. Dmitry Shapiro & Arthur Zillante, 2017. "Contribution Limits and Transparency in a Campaign Finance Experiment," Southern Economic Journal, John Wiley & Sons, vol. 84(1), pages 98-119, July.
    8. Necmi K. Avkiran & Direnç K. Kanol & Barry Oliver & Tom Smith, 2016. "Knowledge of campaign finance regulation reduces perceptions of corruption," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 56(4), pages 961-984, December.
    9. Markussen, Thomas & Tyran, Jean-Robert, 2017. "Choosing a public-spirited leader: An experimental investigation of political selection," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 204-218.
    10. Thomas Stratmann, 2005. "Some talk: Money in politics. A (partial) review of the literature," Public Choice, Springer, vol. 124(1), pages 135-156, July.
    11. Daniel Houser & Thomas Stratmann, 2012. "Gordon Tullock and experimental economics," Public Choice, Springer, vol. 152(1), pages 211-222, July.
    12. Erte Xiao & Daniel Houser, 2007. "Emotion Expression and Fairness in Economic Exchange," Working Papers 1004, George Mason University, Interdisciplinary Center for Economic Science, revised Nov 2007.
    13. Cesar Martinelli & Thomas R. Palfrey, 2017. "Communication and Information in Games of Collective Decision: A Survey of Experimental Results," Working Papers 1065, George Mason University, Interdisciplinary Center for Economic Science.
    14. Houser, Daniel & Morton, Rebecca & Stratmann, Thomas, 2011. "Turned on or turned out? Campaign advertising, information and voting," European Journal of Political Economy, Elsevier, vol. 27(4), pages 708-727.
    15. Fergusson, Leopoldo, 2014. "Media markets, special interests, and voters," Journal of Public Economics, Elsevier, vol. 109(C), pages 13-26.
    16. Nicolas Gavoille, 2021. "Pay for politicians and campaign spending: evidence from the French municipal elections," Public Choice, Springer, vol. 188(3), pages 455-477, September.
    17. Ovtchinnikov, Alexei V. & Pantaleoni, Eva, 2012. "Individual political contributions and firm performance," Journal of Financial Economics, Elsevier, vol. 105(2), pages 367-392.
    18. Hanming Fang & Dmitry A. Shapiro & Arthur Zillante, 2011. "An Experimental Study of Alternative Campaign Finance Systems: Donations, Elections and Policy Choices," NBER Working Papers 17384, National Bureau of Economic Research, Inc.
    19. Bernardino Benito & Francisco Bastida & Ana-María Ríos & Cristina Vicente, 2014. "The causes of legal rents extraction: evidence from Spanish municipalities," Public Choice, Springer, vol. 161(3), pages 367-383, December.
    20. Aimone, Jason A. & Butera, Luigi & Stratmann, Thomas, 2018. "Altruistic punishment in elections," European Journal of Political Economy, Elsevier, vol. 53(C), pages 149-160.

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