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Is Private Campaign Finance a Good Thing? Estimates of the Potential Informational Benefits

  • Andrea Prat
  • Riccardo Puglisi
  • James Snyder

What would happen if the current U.S. campaign finance system, mostly based on private donations, were replaced by a public funding scheme of the same magnitude? Some argue that public funding would deprive voters of useful information, but this can only be true if private donations are somehow targeted to "better" candidates. In this paper, we ask what voters can learn about the "effectiveness" of a legislator from the amount and pattern of contributions received during the campaign. We find that the total amount that a candidate receives is a positive, but weak, predictor of that candidate's effectiveness. Small contributions provide a strong and positive signal of effectiveness, while large contributions are a negative signal of effectiveness. Contributions from organizations also provide a positive signal, while contributions from individuals, parties, and candidates themselves do not.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 122247000000000960.

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Date of creation: 31 Dec 2005
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Handle: RePEc:cla:levarc:122247000000000960
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  1. Prat, Andrea, 2002. "Campaign Advertising and Voter Welfare," Review of Economic Studies, Wiley Blackwell, vol. 69(4), pages 999-1017, October.
  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. Prat, A., 1998. "Campaign Spending with Office-Seeking Politicians, Rational Voters and Multiple Lobbies," Discussion Paper 1998-123, Tilburg University, Center for Economic Research.
  4. Steven D. Levitt, 1995. "Policy Watch: Congressional Campaign Finance Reform," Journal of Economic Perspectives, American Economic Association, vol. 9(1), pages 183-193, Winter.
  5. 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.
  6. Stephen Coate, 2004. "Pareto-Improving Campaign Finance Policy," American Economic Review, American Economic Association, vol. 94(3), pages 628-655, June.
  7. 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.
  8. Weingast, Barry R. & Wittman, Donald, 2008. "The Oxford Handbook of Political Economy," OUP Catalogue, Oxford University Press, number 9780199548477.
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