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

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  • Andrea Prat
  • Riccardo Puglisi
  • James Snyder

Abstract

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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Suggested Citation

  • Andrea Prat & Riccardo Puglisi & James Snyder, 2005. "Is Private Campaign Finance a Good Thing? Estimates of the Potential Informational Benefits," Levine's Working Paper Archive 122247000000000960, David K. Levine.
  • Handle: RePEc:cla:levarc:122247000000000960
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    References listed on IDEAS

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    1. Stephen Coate, 2004. "Pareto-Improving Campaign Finance Policy," American Economic Review, American Economic Association, vol. 94(3), pages 628-655, June.
    2. 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.
    3. 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.
    4. 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.
    5. Weingast, Barry R. & Wittman, Donald, 2008. "The Oxford Handbook of Political Economy," OUP Catalogue, Oxford University Press, number 9780199548477.
    6. Steven D. Levitt, 1995. "Policy Watch: Congressional Campaign Finance Reform," Journal of Economic Perspectives, American Economic Association, vol. 9(1), pages 183-193, Winter.
    7. Andrea Prat, 2002. "Campaign Advertising and Voter Welfare," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 999-1017.
    8. 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.
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    Cited by:

    1. Amit Gandhi & Daniela Iorio & Carly Urban, 2016. "Negative Advertising and Political Competition," Journal of Law, Economics, and Organization, Oxford University Press, vol. 32(3), pages 433-477.
    2. Elena Panova, 2007. "Congruence Among Voters and Contributions to Political Campaigns," Cahiers de recherche 0722, CIRPEE.
    3. Fergusson, Leopoldo, 2014. "Media markets, special interests, and voters," Journal of Public Economics, Elsevier, vol. 109(C), pages 13-26.
    4. Petrova, Maria & Sen, Ananya & Yildirim, Pinar, 2017. "Social Media and Political Donations: New Technology and Incumbency Advantage in the United States," CEPR Discussion Papers 11808, C.E.P.R. Discussion Papers.
    5. Klumpp, Tilman & Mialon, Hugo & Williams, Michael, 2012. "Matching Funds in Public Campaign Finance," Working Papers 2012-20, University of Alberta, Department of Economics.
    6. Brendan Daley & Erik Snowberg, 2007. "A MultiDimensional Signaling Model of Campaign Finance," Discussion Papers 06-027, Stanford Institute for Economic Policy Research.
    7. Vanberg, Christoph, 2008. ""One Man, One Dollar"? Campaign contribution limits, equal influence, and political communication," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 514-531, April.

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