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Debt in Political Campaigns

Author

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  • Ovtchinnikov, Alexei V.
  • Valta, Philip

Abstract

Debt is a significant source of funding of political campaigns, with almost half of all campaigns relying on some form of debt. We analyze the incentives created by this type of debt financing. We show that indebted politicians raise more funds in subsequent elections, especially from special interest groups. Consistent with votes-for-money arrangements, indebted politicians vote for the benefit of those interest groups that help funding their reelection campaigns. The findings support the hypothesis that debt creates distortions, as it forces indebted politicians to take policy positions that are not aligned with the local constituents’ interests.

Suggested Citation

  • Ovtchinnikov, Alexei V. & Valta, Philip, 2018. "Debt in Political Campaigns," HEC Research Papers Series 1165, HEC Paris, revised 30 Jan 2018.
    • Handle: RePEc:ebg:heccah:1165
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    1. How Ted Cruz Engineered a Supreme Court Case To Recoup a Half-Million Dollars
      by ? in Slate Blogs on 2022-01-19 20:36:37

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    Cited by:

    1. Green, Colin P. & HomRoy, Swarnodeep, 2020. "Bringing Connections Onboard: The Value of Political Influence," IZA Discussion Papers 13392, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    Debt financing; Political campaigns; Voting behavior;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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